|
Interest rate remains thorny problem
The interest rates have been staying firmly at sky high levels over the last three weeks. On December 1, after the meetings with the member banks in the north and south, the Vietnam Banking Association (VNBA) forwarded a message that the ceiling deposit interest rate will be maintained at 12 percent per annum, while the association respects the promotion campaigns of credit institutions.
The decision may be surprising, because the association used to continuously appealed to banks to slash interest rates and not to apply promotion campaigns, the move that it believes, makes the actual interest rates higher than the quoted rates.
The decision by the banking association has been described as a necessary move. However, analysts have pointed out the association and the State Bank alone will not be enough to settle the problem of high interest rate.
Inflation rate high, interest rate must be high
Both the deposit and lending interest rates have been sky high over the last three weeks. Banks are paying 13-13.5 percent in interest rates for deposits, and lending at 18-19 percent per annum. some banks are even lending at 1.8 percent per month.
A meeting of the banks in the north was summoned on November 26, and another meeting with the banks in the south took place on December 1. After the meetings, the banking association said member banks have agreed to keep the ceiling interest rate at 12 percent per annum, the rate which has been applied since November 5, 2010.
A banking expert of VNBA said that if the current deposit interest rates can be maintained, banks will be able to ease the lending interest rates in the time to come. Of course, three types of clients (Small and medium enterprises, export companies and enterprises in rural areas) will be able to enjoy lower interest rates.
a close look at the interest rate performance in the market, reveals that while the market 1 (The bank-to-client market) is heating up, the market 2 (The interbank market) is quiet. Le Xuan Nghia, Deputy Chair of the National Finance Supervision Council stressed: “Never forget a principle that the task of the central bank is to stabilize the market 2, while the performance of the market 1 is decided by the market supply and demand”.
According to Nghia, when the inflation rate is high (The consumer price index (CPI) in November increased by 8.96 percent in comparison with the same period the last year), the basic measure to be applied should be the interest rate increase. The increase, first of all, will help Vietnam dong appreciate in value and stabilise the exchange rate. Meanwhile, the interest rate increase will lead to lower investments and consumption, encourage people to save money, which will then help ease the inflation.
An overview
Head of the risk management division of a state owned bank has warned that if banks continue keeping the deposit and lending interest rates at overly high levels, they will have to face two risks, in terms of the deposit and theexchange rate.
Regarding the first risk, he said, most of the deposits at banks now are short term deposits. Especially, even registered long term deposits, are in fact, also short term deposits. Banks may tell clients that the their deposits will be written down as long term deposits, but clients will be able to withdraw money at any time.
But banks cannot ask for the loans back from borrowers at any time.
The second risk is the one in exchange rate. A lot of banks, in an effort to increase the outstanding loans, lend money in dollars to the enterprises which do not have earnings in dollars. The enterprises not only have to face the risk from the increasing interest rates, but also the risk from the dollar increases. When borrowers cannot pay debts, the ‘banks bad debt ratio will increase.
Some international experts have advised the central bank to raise the interest rate on the open market, and raise the refinancing and discount interest rates. The move will send a message that the monetary policies will be tightened. it will also prevent some big banks, especially state owned banks to use the capital for speculation.
vietnamnet
|
