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Dollar-hike worries scare public from cheap greenback loans
Fears the US dollar will strengthen further against the dong have kept businesses from borrowing in dollars despite low interest rates, bankers say.
Interest rates on dollar loans at local banks were lowered by 0.3-0.6 percent per year to 3-6 percent in the week ending June 10, the central bank said Friday in its weekly report.
All state-run banks plus Vietcombank, Vietnam’s largest partly-private lender, have agreed to set the ceiling for dollar lending rates at 3 percent, the central bank said late last month.
Other lenders are expected to follow suit and adjust their rates downward to the 3 percent level.
Bankers said the lowered rates have made dollar loans much cheaper than dong loans.
The maximum rate that banks can charge on dong-denominated loans other than consumer loans is 10.5 percent. Even if businesses are eligible for the government loan subsidy program, they have to pay 4.5-6 percent a year on dong loans.
However, businesses have not taken to the low dollar lending rates, fearing that a bigger depreciation of the dong is in store and would make the dollar loans harder to repay, bankers said.
Ly Xuan Hai, general director of Asia Commercial Bank, said the demand for dong loans has continued to grow while cheaper dollar loans have been shunned.
A commercial bank general director, who wished to go unnamed, said businesses were paying more attention to forex rates than interest rates at the moment.
Dao Hong Chau, vice general director of Vietnam Export-Import Commercial Joint-Stock Bank, said many importers choose to take dong loans and then buy the greenback to pay for their goods, instead of borrowing dollars.
Although the State Bank of Vietnam has confirmed it would keep forex rates stable, businesses are still expecting the dollar to strengthen against the dong, Chau said.
Vietnam widened in March the amount that the dong can trade daily on either side of a central bank fixed rate to 5 percent from the previous band of 3 percent.
The central bank let the currency drop 8.5 percent last year by setting a weaker daily exchange rate.
The dong rate was little changed at VND17,793 per dollar as of 3:20 p.m. Tuesday in Hanoi, from VND17,796 late Monday. The State Bank of Vietnam fixed the reference rate at VND16,950 Tuesday, compared with VND16,949 Monday.
The local currency has weakened about 4.8 percent against the dollar since December 25, when the central bank lowered its value by 3 percent by adjusting the mid-point reference rate to VND16,989 per dollar from VND16,494.
Higher dong savings rates
While dollar loans are lonely, increasing demand for dong loans has pushed dong deposit rates up.
As a result, local commercial banks have raised deposit rates to meet high demand.
The maximum rate lenders are offering on dong deposits is getting closer to the 10.5 percent rate cap.
Ho Chi Minh City Housing Development Bank on Tuesday raised its 36-month dong deposit interest rates to 10.1 percent, the highest saving rate in the banking system now.
The maximum rate reached the 10 percent level last week from an average of 9 percent when the city’s Navibank announced new rates of up to 10 percent on 36-month dong savings.
Credit demand has been growing fast since May as many people want to borrow money from banks to invest in stocks, local newswire VietNamNet quoted Hanoi-based VIB Bank Deputy General Director Tran Hoai Nam as saying Tuesday.
“Local banks have to adjust their savings rates to meet the rising demand,” Nam said, noting that banks are seeking more profits from consumer loans so that they can afford higher savings rates.
Reuters quoted bankers as saying last week that dong-denominated loans have expanded by 21 percent from the end of 2008 to around VND1.2 quadrillion (US$67 billion), nearly surpassing the central bank’s credit growth target of 23 percent for the whole year.
ThanhNien, vietnamplus
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