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Inflation keeps rates high
Many enterprises have struggled with accessing bank loans due to high lending rates, which banks say they will only be able to cut when inflation drops.
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Ms. Duong Thu Phuong |
General Secretary of the Viet Nam Banking Association (VNBA) Duong Thu Huong talked to the Vietnam News Agency about the issue.
Are enterprises experiencing difficulties because they have to borrow at high interest rates?
As VNBA's general secretary, I believe that no bank wants to push lending rates up, but trying to offer reasonable interest rates to stabilise their business activities and lure customers themselves.
Many businesses have to borrow up to 70-80 per cent of their investment capital so they expect lower lending rates to cut their input costs and increase their competitiveness.
Many banks still prioritise loans to some businesses, especially those exporting or operating in agricultural and rural development.
While some businesses said that they had to borrow at rates of 28 or even 30 per cent a year, this did not happen over much.
Banks have to offer high interest rates to deter borrowers as credit growth near the annual ceiling rate of 20 per cent, as allowed by the State Bank of Viet Nam.
When do you expect lending rates to drop?
Interest rates have already started showing signs of decline, but only by around 0.5 per cent a year. Until now, because of inflation, there is no basis for interest rates to decline sharply. The Government, having limited inflation to 7 per cent for this year, had to adjust its target to 15 per cent in May and 17 per cent in June.
Unforeseen factors such as unfavourable weather, world price hikes and disease will all continue to affect inflation until the end of the year while lending rates will only cool down when inflation drops.
Do you think that the current ceiling deposit rate of 14 per cent per year is reasonable?
Depositors are eager for positive interest rates, even bargaining with banks when depositing VND50 million (US$2,400) or more. While inflation is expected to remain at around 15-17 per cent this year, and with banks having to mobilise idle capital for lending purposes, a 14 per cent ceiling rate is no longer rational. However, when deposit interest rates increase, lending rates will surge accordingly.
Could high interest rate pressure motivate enterprises to restructure their production and business activities?
I think that this is a good time to sort and filter business teams and restructure the economy. Each business has to adjust its production and business activities to continue operating amidst current economic difficulties. This is an opportunity for businesses to affirm their capabilities within the market economy. Those heavily reliant on bank loans, but incapable of restructuring, will surely face increasing hardships.
Duong Thu Huong
vietnamnews
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