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Prospects dim for lower interest rates
There have been signs in recent days that interest rates are easing a bit with decreases of between 1 and 2 per cent in deposit interest rates and 0.1 and 0.3 per cent in lending rates.
However, opinion is divided on whether the central bank's target of lowering lending interest rates to 17 or 19 per cent per year in the next five months would be realised.
With current interest rates standing at 21, 22 or even 23 per cent, the banks have to cut their lending interest rates by 4 or 5 per cent to realise the target.
Central Bank Governor Nguyen Van Binh has observed that there are sufficient conditions for interest rates to drop. The liquidity situation at banks is stable and credit growth has been poor in July, he notes.
A banker in HCM City agrees, saying his bank has reduced its lending rate to 19.5 per cent per annum but disbursement is still slow. Yet another banker says the total amount of outstanding loans at his bank has been falling of late.
He says enterprises are struggling with economic difficulties and thus refraining from taking out new loans, and loans for the non-production sector are limited anyway.
"We may negotiate and lower interest rates to meet our clients' needs," he says.
The inter-bank rate has been stable at 15 and 16 per cent. Since July, several banks have kicked off promotion programmes to relieve interest rate burdens for their clients, which has made preferential lending rates of some banks stand at around 21 per cent per year.
The Asia Commercial Bank (ACB) has also launched a special credit programme for individuals and households in need of capital, reducing interest rates by 1.2 points per year for both short-term loans or loans of VND500 million (US$24,000) or more.
Some other banks that have seen slow credit growth, like Sacombank, OCB and DongA, have also announced plans to adjust their interest rates to push up lending.
While the Government is looking to curb credit as a major part of its anti-inflation strategy, several experts are now saying current credit policies are too tight. They say many enterprises are struggling to survive, and it is time to loosen the policies and save them from closure.
However, the fact is that there has still been no sharp decline in interest rates because deposit rates remain high.
At medium-sized banks, interest rates on deposits of less than VND100 million stand at around 14 per cent, while those over VND100 million ($4,784) fetch between 16 and 16.5 per cent. The rate of 17 per cent is still applied to deposits of VND300 million ($14,350) or more.
Dam The Thai, Deputy General Director of HD Bank, says banks are finding it difficult to balance their deposit and loan rates, although they have ample funds for lending. Banks that still maintain a high deposit rate to retain its customers find it most difficult to lower their lending rate, he says.
Some economists says the pressure of high inflation in the past months has prevented banks from lowering their lending rates, despite their efforts to do so.
Meanwhile, many banking officials believe deposit and lending interest rates would come down only when the central bank loosens the current monetary policies in force by increasing money supply via the open market and lowering inter-bank interest rates from the current 14 and 15 per cent to 12 per cent.
The banking sector's credit growth has been brought down to as low as nearly 8 per cent because of the tightened policies, they say. Therefore, the central bank can bravely pump more money into the open market so that lending can increase by 5 per cent and deposit interest rates are kept at 14 per cent, they say.
Thien Ly
vietnamnews
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