Though the State Bank of Vietnam stated that it would lower the ceiling deposit interest rate by one percent every quarter if the macroeconomic conditions and inflation remain stable, the decision to lower the interest rate to 12 percent in early April still surprised observers.
Slashing interest rates a must
This is for the second time within one month the State Bank eases the interest rate, which is really a surprise to many international institutions, which advised the central bank to keep cautious when taking such a step, especially when Vietnam still has to fight against the inflation.
Meanwhile, Vietnamese observers believe that slashing interest rates is the only choice for now, when the majority of Vietnamese enterprises have got exhausted, and the GDP growth rate in the first quarter of 2012 was modest at 4 percent.
However, an expert from the Finance Academy believes that the main factors that prompted the central bank to slash interest rates come from commercial banks. Small banks’ liquidity has been improved, while big banks complain it’s difficult to lend now.
The representative of Asia Commercial Bank (ACB) said at the meeting with the Ministry of Planning and Investment that the bank had 3 billion dollars which has not been lent.
The report by the National Council for Finance Supervision showed that the total outstanding loans in the first three months of the year decreased by 2.13 percent in comparison with late 2011. Meanwhile, the mobilized capital growth rate has reached 1.56 percent during the same time.
The report pointed out that the situation of businesses is getting worse, while businesses do not have necessary conditions to satisfy the requirements of banks to access bank loans.
Also according to the council, the ratio of loan interests on the production cost of listed companies has increased from 2.93 percent in 2010 to 3.61 percent in 2011. Meanwhile, the ratio of the financial costs on the production costs has increased from 4.72 percent to 5.56 percent.
Since banks cannot find borrowers these days, they have to use the idle money to buy bonds. It is estimated that in the last two months, banks spent trillions of dong to buy government bonds, even though the bond interest rates are not attractive if comparing with the commercial loan interest rates.
Banks’ interest rates lowered accordingly
Just several days before the decision on slashing interest rates was released, Do Thi Nhung, Deputy Director of the Monetary Policy Department under the State Bank of Vietnam, informed that the macro economy has been in stability, the inflation has been controlled and banks’ liquidity has been improved.
This means that the ceiling interest rate reduction has been foreseeable.
In fact, commercial banks have continuously slashed lending interest rates recently, before the central bank urged them to do that. The preferential interest rates applied by some banks have dropped to 14-16 percent per annum.
In early April, Vietinbank lowered the interest rates of the loans to agricultural production, supporting industries, small and medium enterprises to 14-15 percent. MHB announced the program on lending 3 trillion dong with the interest rates lower by 1-2 percent per annum than the minimum commercial interest rates of the bank. HSBC has also slashed the consumer loan interest rate by one percent.
On April 10, Eximbank released a notice on the new credit program, under which, Eximbank would reserve 6 trillion dong to lend to export companies, small and medium enterprises, and individuals who borrow capital to run their own business.
Source : businesstimes.com.vn