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Credit growth slows to a crawl in December
Credit growth at commercial banks has slowed this month due to high interest rates that now range at 17-20 per cent per year for dong-denominated loans.
Vietcombank's credit growth has been frozen for about a month as the bank scrutinised loan applicants' willing to borrow at such inflated rates, said Vietcombank General Director Nguyen Phuoc Thanh.
"We are vigilant against companies which try to obtain loans by any means because it implies weak competitiveness and financial capacity," commented Thanh.
Eximbank General Director Truong Van Phuoc predicted the trend of sluggish credit growth would continue through the end of the month.
Lending interest rates began rising in November after the central bank hiked the prime rate from 8 to 9 per cent and began to further deregulate the interest rates commercial banks could charge.
Stiff competition among banks to attract capital had also ignited a deposit interest war, putting further pressure on lending rates. However, to stem the inflationary tide of high interest rates, the State Bank of Viet Nam pressured commercial banks to accept a curb on deposit interest rates, now under a mandatory cap of 14 per cent.
Lending interest rates should also hover within a range of 11-14 per cent, a level high enough to discourage inefficient business operations but not so high as to cause difficulties for enterprises and the economy, said Thang Long Securities Company General Director Quach Manh Hao.
The central bank earlier this month estimated that credit growth in the commercial banking system would reach the target for the entire year of 25-27 per cent.
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