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Loophole could pave way for higher rates
Lending interest rates charged to borrowers by the nation’s credit institutions cannot exceed 150 per cent of the prime rate, the State Bank of Viet Nam reaffirmed.
But a State Bank official has confirmed that a regulatory loophole may be used to allow banks to negotiate higher rates with nearly any borrower.
With the prime rate at 10 per cent, effective today, the maximum annual interest rate banks can now charge on loans falls to 15 per cent, from the previous 16.5 per cent.
Local people’s credit funds, however, would continue to be allowed to charge borrowers up to 16.5 per cent.
Under Official Letter No 8260/VPCP-KTTH, issued by the Government Office on Tuesday, lenders and borrowers will be allowed to negotiate interest rates for certain planned projects, with the State Bank governor responsible for approving any special rates.
Commenting on an expectation that banks would attempt to use this loophole to set higher interest rates on nearly all projects, a senior official at the central bank who asked to remain anonymous confirmed to Viet Nam News that the State Bank was indeed considering a negotiated lending rate mechanism for all projects.
"However, it is not easy to do as the operation of credit institutions must not violate current laws," the official said. "The Civil Code regulates that lending rates in dong do not exceed one-and-a-half times the prime interest rate set by the State Bank."
Following the decision this week to cut the prime rate to 10 per cent, Vietcombank yesterday cut its preferential lending rate by 0.5 percentage points to 10.5 per cent annually. The common lending rate was also cut 0.52 percentage points to 12.48 per cent, effective today.
Exporters who committed to selling foreign currencies to Vietcombank, meanwhile, would be given preferential rates on loans denominated in dong of only 5.04 per cent per year.
The State-owned Bank for Investment and Development of Viet Nam (BIDV) also yesterday announced it would cut common short-term lending rates to 10-11.5 per cent, effective Monday, down from the current 11.4-13 per cent.
Medium- and long-term lending rates would be equal to the rate the bank pays on 12-month term deposits plus at least 3 per cent.
The BIDV said it would prioritise credit for manufacturers of essential goods, exporters, and small- and medium-sized enterprises to help them make it through the current economic slowdown.
VNS
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