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Overly high lending interest rates keep borrowers away
A lot of businesses say they dare not borrow money at this moment, because the expected profit is not high enough to cover capital costs.
Economists believe that the reasonable lending interest rates should be at 11-14 percent per annum for now, which are high enough to avoid ineffective investments and low enough to encourage enterprises to borrow money to expand business.
Meanwhile, the average lending interest rate has climbed to 20 percent per annum which many businesses complain are unaffordable for them. As the result, many businesses have decided to keep production at moderate level and not to borrow capital to expand business.
“The credit growth rate of our bank has been slowing down for the last month,” said General Director of Vietcombank Nguyen Phuoc Thanh.
Representative from Tien Phong Bank admitted that though the demand for capital from businesses remains very high, the bank still finds it difficult to increase outstanding loans because the high lending interest rates have been keeping borrowers away.
Thanh from Vietcombank said that the bank itself dare not push up credit because it fears risks, once the lending interest rate has become overly high at 20 percent per annum. He said that the bank is now mainly focusing on disbursing for the credit contracts it signed before – most of them are medium and long term loans with stable interest rates.
“Banks will put big difficulties for themselves if they provide loans at overly high interest rates. We should keep cautious when lending to the clients who accept to borrow money at any costs. In many cases, enterprises have to accept high interest rates because of their bad financial situation. If so, we have doubts about their solvency,” Thanh explained.
General Director of Eximbank Truong Van Phuoc has also said that his bank’s outstanding loans growth in the first two weeks of December slowed down, and the trend is expected to continue until the end of the year.
The same situation can be seen in most banks at present. Banks prove to be reserved in providing loans, because they have to ensure their liquidity, while businesses dare not borrow money because of overly high interest rates.
Meanwhile, General Director of Navibank Nguyen Quoc Sy believes that the credit growth rate would not be high in the time to come, because it is more and more difficult to mobilize capital in the months just before Tet. Besides, banks have become selective in providing loans, while businesses can not afford overly high interest rates.
Director of the HCM City Branch of the State Bank of Vietnam Ho Huu Hanh has confirmed that the credit growth of local banks has been slowing down since the beginning of December. This seems to be a strange thing, because it is now the production season and enterprises need capital to keep production. Hanh said that the State Bank will only have exact figures about the credit growth rate by the end of the month. However, reports sent by commercial banks show that the outstanding loans have been increasing very slowly.
Experts have warned that the overly high interest rates have made the credit flow stuck. “The national economy will not be able to develop without capital,” said Dr. Quach Manh Hao, General Director of Thang Long Securities Company when talking about the possible impacts on the national economy.
Eximbank’s General Director Truong Van Phuoc thinks that in early 2011, when kicking off the new credit plan, banks will have to make every effort to lower lending interest rates in order to push up the disbursement.
vietnamnet
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