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Rate cut fails to lift bank lending
Bank loans with an interest rate of 15 per cent per annum are still beyond the reach of many enterprises involved in four business sectors that have been given preferential loan status.
On May 4, the State Bank of Viet Nam issued a circular, imposing a 15 per cent cap on lending interest rates for the four preferential sectors.
The beneficiaries include businesses operating in exports, agriculture and the support industry, as well as small- and medium-d enterprises.
Both enterprises and the public have welcomed the central bank's move.
However, few eligible enterprises have been able to access bank loans at the lowered rates, although the new lending interest rate regulation has already come into effect.
Trinh Thanh Ninh, owner of a garment and textile trading company in HCM City's Tan Binh District, said he visited a local commercial bank to borrow VND100 million (US$4,762) on the first day that the 15-per cent lending interest rate began.
"Although my company meets all conditions as required by the circular, including business effectiveness and repayment ability, my loan application was still rejected by the bank," he said.
"A bank employee told me that the bank had to wait for detailed guidance from the central bank. Now they can give me a loan at 18 per cent rate per annum."
Huynh Thi Thu, director of the Hoang Thu Trade Service Company in District 9, said she wanted to borrow VND2 billion ($95,238) at the bank and use the money for her company's working capital.
"The bank refused to lend to us because they said the value of our assets used for collateral was very low, so we could not qualify," Thu said.
"The bank staff also told me that even if I could get the loan, I would have to accept an interest rate of 18 per cent per annum and not 15 per cent as regulated in the circular."
Although the central bank has lowered the lending interest rate to 15 per cent, few enterprises qualify for bank loans at the new rate, according to Truong Chi Thien, director of the Vinh Thanh Dat Food Joint-Stock Company.
Phong Phu Trade Service Joint-Stock Company is one of the few enterprises that has been able to receive bank loans at the 15 per cent interest rate.
Company director Luong Trong Tuan said: "With the new interest rate, we now feel more comfortable. But we had to go through many complicated procedures to get the lower rate."
Directors of many commercial banks point out that 97 per cent of enterprises are small- and medium-d enterprises, and that the central bank has not given detailed guidelines on the interest-rate cuts.
Each bank has developed its own regulations on the new interest-rate cut.
At the Viet Nam Maritime Joint Stock Commercial Bank, for instance, customers in preferential sectors are still required to meet several conditions to gain access to loans with the 15-per-cent interest rate.
They must have had no overdue debts within the last 12 months and they must reveal their audit reports. They also must be classified in either Group A, 2A or 3A, which are categories of banks that have outstanding results. The HCM City Development Joint-Stock Commercial Bank said it could offer loans at a 15 per cent rate for SMEs involved in exports.
Although the central bank has placed a 15 per cent lending interest rate cap for enterprises in the four preferential sectors, this does not mean they can get loans, according to Tran Xuan Gia, general director of the Asia Commercial Bank (ACB).
Eligible enterprises that wanted to borrow cheap capital must show they had specific business strategies and assets for collateral, as well as repayment ability.
Banks were also enterprises, so they needed to ensure security for maintenance as well, Gia said.
After the central bank cut the deposit interest rate to 12 per cent per year, many banks also slashed their lending interest rates to 14 and 15 per cent per annum.
However, lending activities become volatile since the banks can not find many qualified customers, according to Gia.
Truong Van Phuoc, general director of the Viet Nam Export-Import Joint Stock Commercial Bank, said the bank had lent only VND600 billion ($28.6 million) from its VND1.4 trillion ($66.7 million) credit package.
Loans with an interest rate of 14 per cent per annum had been offered to enterprises to purchase rice for export, Phuoc said.
Many experts said the banks' slow capital disbursement for loans was due to concerns about the volume of bad debt, which increased in the first quarter of the year.
To avoid risks, many banks prefer using their capital sources to buy Treasury bills, despite the bill's low interest rate of 5 per cent. Although banks could earn more interest (15 per cent) on their loans, they fear that borrowers may not be able to pay back the loans.
Senior financial expert Nguyen Tri Hieu said that lowering the interest rates was not the most important task at this time.
The immediate issue was to seek ways to pump capital into the economy, he said.
To encourage banks to lend to small enterprises, the Government should set up a guarantee fund for small enterprises, he suggested.
Nguyen Dinh Cung, deputy director of the Central Institute of Economic Management, proposed settling bad debts, eliminating weak banks and lifting interest-rate caps on deposits and loans
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