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Commercial banks begin tightening credit
The interest rate market has cooled down after the State Bank of Vietnam announced it will pump money through open market operations (OMO). However, banks’ liquidity remains questionable. The high deposit interest rate of 13 percent per annum has still been maintained.
Several days ago, at a meeting with representatives from 15 commercial banks, which have regular transactions on OMO, the State Bank announced that it will pump money through OMO to help improve the liquidity of banks.
After the announcement the interbank interest rate immediately went down to 13 percent per annum and banks now tend to borrow short term loans for two or three weeks. Many banks have also said “no” to clients’ businesses that want to negotiate the deposit interest rates with banks.
Ly Xuan Hai, General Director of Asia Commercial Bank (ACB), said that the eased interest rates on the market is now truly reflecting the capital demand and supply in the market, showing that the banks’ liquidity is not serious.
However, in fact, not all banks can access the cheap capital provided by the central bank to improve their liquidity. Besides, the stiff competition to scramble for depositors forces banks to keep the deposit interest rates at high levels.
On November 15, SeABank offered the interest rate of 13 percent per annum for 12-month term deposit, while VPBank offered 13.5 percent for 13 month term deposit. Meanwhile, many other banks, though posting the deposit interest rate at 12 percent, are offering many other preferences, which means that the actual interest rates offered by the banks are higher than the quoted rates.
Nguyen Thi Bich Thuy, Deputy General Director of Habubank, said that Habubank is not seriously lacking capital at this moment, but it still has to raise deposit interest rates in order to retain clients, because the interest rates offered by other banks are very high.
According to Thuy, though the interest rates have increased, the deposited volume has not increased. Therefore, banks are facing big difficulties because of the higher capital cost.
The State Bank has been trying to adjust the credit structure and requesting commercial banks to restrict loans to three sectors, securities investments, real estate and consumer credit. Though the outstanding loans provided to the three sectors remain within the safety line, accounting for 18 percent of the total outstanding loans, the outstanding loans tend to increase.
“I think that the central bank’s policy on restricting loans to non-production sectors aiming to curb inflation is a reasonable decision. However, it is not necessary to tighten credit to the sectors any further, because banks have been tightening the lending to the sectors for a long time already,” said Ly Xuan Hai from ACB.
Many other banks have issued new regulations aiming to tighten credit. Nam A Bank, for example, now asks borrowers to pay the interest rate of 21 percent per annum for consumer loans, while the previous interest rate was only 17 percent.
The worrying thing is that commercial banks not only restrict the lending to non-production sectors, but production sectors also find it difficult to borrow capital. Now businesses have to borrow money at high interest rates of 17 percent per annum on average.
The head of the credit division of a joint stock bank said that his officers are now sitting idle because the bank’s leadership has ordered to tighten credit. “We are only providing loans to big and loyal clients while new and small clients cannot access bank loans,” he said. Even if banks open their doors widely to small clients they will not be able to borrow because of the overly high interest rates.
Thuy from Habubank said though the bank is still disbursing money as usual, it does not plan to expand credit like it did in the first months of the year.
vietnamnet, Dau Tu
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