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Banks need time to adjust to new lending rate cap
Despite the deposit and lending rate caps having dropped to 11% and 14% respectively, banking experts said lending rates remain prohibitively high for local companies and that it will take three more months to see clear signs of rates falling.
The announcement on the interest rate cuts that the State Bank of Vietnam (SBV) released late last Friday did not help the stock market on the first trading day of the week. A report by Hochiminh City Securities Co. (HSC) showed the rate cuts were less than investors’ expectations since credit growth in the first five months of the year is put at minus 0.98%.
Fiachra Mac Cana, managing director and co-head of the institutional division of HSC, said the current monetary policy was not the same as before because local banks, afraid of rising bad debts, tend to take prudence in lending though they sit on ample liquidity and have lower lending rates, he said.
Meanwhile, according to Vietcombank, the news about the interest rate cut has left no impact on securities investors. It seems the stock market is awaiting clearer policy measures for propping up economic growth.
Phan Dung Khanh at Kim Eng Securities Co. said lending rates have dipped but local companies have little appetite for bank loans as interest rates stay high and inventories are building up.
With SBV’s recent moves, market observers noticed mobilization rates have been pulled down rapidly while lending rates have been revised down step-by-step.
The HCM City Statistics Office said that as of May 10 a lot of companies had still borrowed from banks at an annual rate of over 19%.
Nguyen Duc Kien, vice chairman of ACB’s board of founders, said the average lending rate in the banking system still hovers around 17% per annum. So the 14% lending rate ceiling set by SBV since last Friday has yet to give cash-strapped enterprises a real lifeline, Kien stated.
In fact, a number of commercial banks have mainly invested in government bonds instead of lending to customers.
Actually around 77.4 trillion dong worth of government and government-guaranteed bonds has been issued successfully in the year to date, with most buyers being banks, as observed by Bao Viet Securities Co. Meanwhile, the nation last year witnessed the issuance of government bonds totaling more than 73 trillion dong only.
Explaining such a phenomenon, OCB chairman Trinh Van Tuan said buying such debt papers is the safest choice by industry insiders in the current context.
Truong Van Phuoc, CEO of Eximbank, said local lenders had mobilized funds at high costs over the past time. To avoid losses, they need more time to gradually adjust down lending rates subject to the cap set by the central bank, Phuoc added.
The Saigon Times
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