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Banks propose interest rate cuts on loans to businesses
It is imperative that banks cut their lending interest rates to support businesses, was the message from a meeting held in HCM City between the Viet Nam Banking Association and its members in the southern region on Friday.
Though deposit interest rates are capped at 14 per cent, many banks continue to lend at 21-22 per cent.
Many companies in the city complain that despite being eligible for preferential loans under the Government's interest rate subsidy programme, they are unable to get them to develop their business.
Many banks lent not only at high interest rates but also only for short terms, putting great pressure on businesses, Pham Ngoc Chau, Deputy General Director of the Hancofood Joint Stock Company, said.
The head of a textile and garment company in the city said though the peak shopping season was approaching, the high lending rates and inflation had forced his company to ease off to avoid losses.
It is not just manufacturers who are affected by the credit crunch but also distributors.
Tran Thi Minh, the Director of a mini supermarket chain in HCM City, said her company had planned to open more outlets in the city but had to shelve it because of lack of capital.
A city-based banker admitted that procedures related to giving preferential loans to businesses were very stringent.
They were required to sell all the US dollars they earn from exports to the lenders at quoted prices, have had a long relationship with the lender, and have a feasible production project, he said.
Data from the State Bank of Viet Nam shows that in the third quarter banks often lent to agricultural, rural, and export firms at 17 to 19 per cent, to production and trading firms at 17-21 per cent, and to non-production sectors at 22-25 per cent.
Many bankers admitted that the lending rates remained so high that many firms were unable to afford loans.
Tran Thanh Hoa, general director of the An Binh Joint Stock Commercial Bank, said her bank had recently offered loans at 18 per cent but only a few companies had been interested.
The current rates brought risks not only to borrowers but also to banks themselves, Ly Xuan Hai, general director of the Asia Commercial Joint Stock Bank said, citing the example of his bank.
ACB had never had bad debts of more than 0.5 per cent in the past but they had now reached nearly 1 per cent, he said, adding cutting interest rates was an urgent task for ensuring banks' safety.
Trinh Van Tuan, general director of the Orient Commercial Joint Stock Bank, suggested that the central bank consider establishing an interest rate cap for loans to priority areas such as production and exports.
Several bankers said deposits had also declined significantly after the central bank tightened control over the deposit interest rate cap.
To Nghi, deputy general director of the Viet Nam Export – Import Joint Stock Commercial Bank (Eximbank), said even major banks had seen deposits fall. Meanwhile, inter-bank rates have climbed to over 20 per cent and even 23 per cent.
Nguyen Thi Muoi, deputy general director of the Sai Gon Bank for Industry and Trade, said the central bank should have timely policies to take care of banks' need for funds to improve their liquidity.
Truong Hoang Luong, General Director of the Kien Long Joint Stock Commercial Bank, said the central bank should take measures to narrow the gap between the inter-bank and deposit rates. There was a common deposit rate for all banks but specific polices should be adopted to help small banks handle their liquidity problems, he added.
vietnamnet, VNS
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