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Investors urge cuts in interest rates
The Viet Nam Association of Financial Investors (VAFI) has proposed several measures that would help lower interest rates on loans to under 10 per cent.
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| Tiles are made at a private enteprise in the central province of Thanh Hoa. The Viet Nam Association of Financial Investors (VAFI) has put forward several measures that would help lower interest rates on loans to under 10 per cent. It said current interest rates are too high for most enterprises. |
VAFI said it agreed with the State Bank of Viet Nam's (SBV) current measures to ask State-run commercial banks to take the lead in cutting lending interest rates and encourage joint-stock commercial banks to follow.
Pumping more money through open-market operations and adjusting interest rates on deposits are two other measures proposed by SBV, and agreed to by VAFI.
The association said these measures would help cut lending interest rates to between 14 per cent and 18 per cent per annum by late 2012.
VAFI, however, said these lending rates remained too high for most enterprises.
The VAFI, in one of its proposals, said the central bank should immediately cut deposit interest rates of organisations to 11 per cent per annum.
According to VAFI figures, deposits made by organisations or companies at credit institutions account for between 40 and 55 per cent of all deposits.
If the interest rates of these deposits are cut, it would enable lending interest rates to quickly fall.
The immediate drop in interest rates on organisations'deposits would not affect capital mobilisation in the commercial bank system or the foreign-currency market, according to the VAFI.
The VAFI also recommends that the central bank keep the interest rate of foreign-currency and gold deposits to under 1 per cent per year, and impose a maximum 18 per-cent lending interest-rate cap.
If this was done, interest rates on individuals' deposits would fall, according to the VAFI.
With this measure, VAFI estimates the lending interest rate would drop between 12 and 16 per cent, with the most common rate likely being between 14 and 15 per cent per year.
The VAFI also proposed that the government issue a draft decree on gold-trading management to stabilise the foreign-exchange market.
VAFI said the most important aspect of any future gold-trading management policy would be to issue regulations on value-added tax (VAT) and excise tax for gold trading activities.
This would ensure that these taxes reach 20 per cent, the level in line with Viet Nam's current taxation laws and appropriate to international practice.
The 20 per cent tax would help wipe out the hoarding of gold bullion that is done in anticipation of higher prices.
As a result, the value of the dong would increase, thus attracting a large flow of money into the banking system, according to VAFI.
The VAFI's general secretary, Nguyen Hoang Hai, told Sai Gon Tiep Thi newspaper that the association estimated that the SBV would likely collect US$5 billion, or VND100 trillion, from this capital source.
VAFI said that if lending and deposit interest rates fall, the bond market would recover and develop, giving the banking system more opportunities to mobilise long-term capital sources.
As a result, foreign currency and gold resources would flow into commercial banks, and the country's foreign exchange reserve would reach an estimated US$30 billion in the next three years.
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