interest-rates-drop-but-loans-are-not-increasing

Vietnam: Interest rates drop, but loans are not increasing

  • Sep 03, 2020

Lending interest rates have decreased significantly, but many businesses still cannot access bank loans at low costs.

According to the State Bank of Vietnam (SBV), dong interest rates are hovering around 0.1-0.2 percent per annum for demand deposits and less than 1 month deposits. The highest interest rate, 7.3 percent per annum, is offered to longer-term, more than 12 month deposits.

Analysts believe that the interest rates will continue to decrease from now to the end of the year because of the prime interest rate may be adjusted by the central banks and liquidity in the banking system is profuse.

SBV has delayed the implementation of the new regulation on restricting the use of short-term mobilized capital for long-term lending.

The Saigon Securities Incorporated (SSI) predicted that the deposit interest rate may decrease by another 0.5-0.7 percent per annum for less than 12 month deposits, and by 0.2-0.3 percent for over 12 month deposits.

Meanwhile, some analysts believe that the interest rates would decrease by one more percent at maximum. They said the sharp decrease won’t happen, because low interest rates won’t attract depositors. People with idle money would rather inject money in other investment channels that deposit at banks.

As the deposit interest rates are on the decrease, banks will be able to slash the lending interest rates.

The lending interest rates are now at 6-9 percent per annum for short-term loans and 9-11 percent for medium and long-term loans. The preferential interest rate of 5 percent is applied to businesses in some specific business fields.

The lending interest rates are now at 6-9 percent per annum for short-term loans and 9-11 percent for medium and long-term loans. The preferential interest rate of 5 percent is applied to businesses in some specific business fields.
 However, businesses still complain that the interest rate cuts are not sharp as expected. The new loans have the interest rates of just 0.1-0.5 percent lower than the loans they got before the epidemic outbreak.

According to Le Hoang Minh, director of Thien Anh JSC in HCM City, when he contacted a bank for a 9-month loan with mortgaged assets, he was informed that the interest rate was 7.5 percent for the first three months, and 8.5 percent for the next six months.

Some bankers said it is impossible to slash the lending interest rates sharply, especially when businesses don’t have good business plans.

Voters have recently proposed that SBV cut interest rates by 2 percent at least for existing and new loans provided to clients suffering from Covid-19.

The SBV Governor has requested that credit institutions cut operation costs and pay to workers, and ‘sacrifice’ profits to be able to reduce the lending interest rates further.

However, analysts said with the current conditions, one should not expect to see lending interest rates decreasing sharply. 

Tran Thuy

Source: https://vietnamnet.vn/en/business/interest-rates-drop-but-loans-are-not-increasing-669193.html