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Regulators ask banks to lower rates on old loans
The State Bank of Viet Nam has encouraged domestic commercial banks to lower high interest rates on old loans in an attempt to alleviate borrowers' difficulties.
The central bank's new policy is also expected to help banks reduce their bad debts.
Between July and October, interest rates on bank loans stood at a record level of between 18 and 21 per cent per year.
As a result, borrowers who took out bank loans at high interest rates have to pay great amounts of money for loans that have not yet come to their maturity date.
To cut costs, many borrowers have sought credit on the black market to pay off their loans ahead of schedule.
However, most borrowers are enterprises that have a large volume of unsold products or materials in stock, and no assets that can be used as collateral to get loans from other financial sources.
Therefore, borrowers who fall into this category are much more in need of local banks' support in order to settle their debt-related problems.
Different moves
In reality, many commercial banks have already made adjustments on interest rates on some old loans to enterprises. However, the interest rate cuts were implemented in different ways.
The Bank for Agriculture and Rural Development (AgriBank) has accepted a VND2 trillion decrease in its turnover when it decided to cut interest rates on old loans that had been given to households involved in such industries as agriculture, forestry, fishing and salt production.
The newly-cut interest rate was only 12.72 per cent - 0.03 per cent lower than the current lending interest rate's ceiling.
SCB's loans eligible for this policy are worth a total of VND17 trillion.
SCB general director Pham Anh Dung said that almost all loans to enterprises with interest rates of 21 per cent were sliced to 18 per cent.
Since the beginning of this year the Dong A Bank has begun cutting high loan interest rates from 21 per cent to between 18 and 15 per cent, according to Dung.
The bank's preferential policy was applied to labour-intensive enterprises, and those involved in steel and plastic industries, he said.
Bank industry insiders said that cutting the interest rates on old loans had created certain difficulties for the banks because they still had to pay high interest rates for deposits whose terms had not yet ended.
Vu Thi Vang, vice chairwoman of the Dong A Bank's managing board, admitted that when banks cut interest rates on old loans, they had to suffer certain losses.
However, since banks still participated in the game, they had to share difficulties with their customers, Vang said.
Viet Nam News
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