Lending rate will not fall until Q3 2012
Despite the Vietnamese central bank's move to reduce the deposit rate to 12 percent last week, most experts forecast the lending rate will only fall from the third quarter, with the average rate expected at some 15.5 percent.
Several banks have announced credit lines amounting to trillions of dong each at softer rates, but experts said few enterprises could access such sources of cheap capital.
An executive of a large commercial bank predicted lending rates would be all slashed to 15.5 percent a year between July and August this year.
Soft loans with reduced interest rates offered by local banks during the past time target certain customers only, he said. In fact, just some lenders with strong financial capacity have lowered their rates in line with the central bank's order, he added.
"Interest rates will strongly go down if bad debts of the banking system are dealt with basically," said the executive.
Now Asia Commercial Bank (ACB) charges its borrowers with a yearly rate of 17.5 percent on average. Lowering interest rates is an obvious trend which will continue more evidently in the future, according to general director Ly Xuan Hai of ACB.
Banks are currently trying to secure margin profits with lending rates set based on real capital demand from enterprises. This is not the right time for them to revise down the rates as much as expected, Hai explained.
Economist Tran Du Lich deemed the central bank's latest deposit rate cut just a slow move. "It would be too late to rescue cash-strapped firms if the move came later," Lich reckoned.
Lich believed it would be difficult for local lenders to gain the credit growth rate of 15-17 percent annually this year as set by the central bank. It is due to cautiousness for bank loans among corporate borrowers who are afraid of failing to service the loans later.
Pham Hong Hai of HSBC Vietnam said the central bank's move had responded to the market's expectation when reducing borrowing costs paid by individual and corporate borrowers. This will motivate the country's economic growth rate in the context of its gross domestic product (GDP) staying at a meager increase of 4.1 percent in the first quarter.
Over the past time, interest rates on the inter-bank market have been easing as well.
The market has seen those loans with terms of less than three months traded at below 12 percent per annum.
Therefore, the central bank is totally rational to pull down deposit rate cap to 12 percent yearly to match deposit rates with real market levels. Meanwhile, Vu Thanh Tu Anh, director of research at the Fulbright Economic Teaching Programme, insisted on a credit market without any ceiling rates set. The so-called rate cap just leaves bad impacts on related sides, Anh pointed out.
Lending rate cap will eliminate the base to categorise customers and credit risk assessments by credit institutions as it is the only tool banks wield to treat various kinds of customers, Anh cited.
Similarly, the deposit rate cap imposed on depositors causes those with small deposit amounts to suffer unfair treatment consequently, he said. "The present ceiling deposit rate proves the banking sector restructuring have yet to bring about good results as expected" he asserted.
The Saigon Times
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