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Bank credit rate hits dizzy 20%
Banks are still reluctant to lend to businesses although interest rates have already climbed to 19 and 20 per cent, putting the latter in a tight spot.
Dam Quang Hung, Deputy Director of the Son Ha International Joint Stock Company, said his company had planned to borrow VND500 billion (US$25.6 million) to fund its operations for the whole year.
"Many credit institutions promised to lend to us. However, in the last two months some have refused to lend or delayed it until the next year, saying their credit growth has already reached the central bank's limit of 25 per cent," he said.
Fortunately, a few banks lent some money to maintain production but at significantly higher interest rates, he added.
But despite the dwindling credit sources and high costs, many firms were forced to seek bank loans since they could not stop their production activities, Pham Chi Cuong, Chairman of the Viet Nam Steel Association, said.
Most of the association's members now paid 19 per cent interest on average while the cost of feedstock had also increased, he said.
"With the 8 per cent fall in the value of the dong on top of this, steel production costs have been 10 per cent to 15 per cent higher in the last month."
Exporters too face a cash crunch. Banks offer them loans at just 14 per cent but they are required to sell their dollars to the banks at the official rate.
"Credit now meets only 50 per cent of the needs of small- and medium-sized enterprises," Cao Sy Kiem, Chairman of the Small- and Medium-sized Enterprises Association, said.
An official from Viet A Joint Stock Commercial Bank said his bank gave priority to long-standing customers and lent at 16-17 per cent.
"We however carefully appraise borrowers' business plans before lending," he said.
"Businesses' demand for loans remains huge but my bank is not keen to lend because both deposit and loan interest rates are too high, causing high risk for both lenders and businesses," the head of a major city-based bank said.
Even if businesses were ready to borrow at any cost, his bank would carefully scrutinise the borrowers' requirements to ensure safety.
Le Xuan Nghia, Vice Chairman of the National Financial Supervision Committee, said interest rates were relatively high now but they must be accepted for some time to contain inflation.
He admitted, however, that keeping interest rates high to combat inflation should not be a long-term solution.
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