VINACHEM

VietNamNet Bridge –Banks will cut interest rates in response to companies’ complaints about preventively high borrowing costs, said the central bank.

Business leaders, speaking at a meeting with the HCMC government and the central bank last Friday, said their biggest concern at the moment was high interest rates.

Banks’ lending rates have shot up to 16-18% a year though it is hard for corporate borrowers to secure a margin higher than that range at a time of economic hardship, they said.

Huynh Van Minh, chairman of the HCMC Union of Business Associations, said the average deposit rate offered by banks was 13-14%, so their lending rate would amount to 18%, even 20% at some banks.

“Enterprises with a profit margin above 25% can afford such a high lending rate. Manufacturers cannot secure such a margin,” Minh said.

He suggested that following the approval of negotiable interest rates for short-term loans, the State Bank of Vietnam should ask banks to have different lending requirements for different groups of businesses.

Ly Kim Chi, vice chairwoman of the Food and Foodstuff Association of HCMC, said 80% of member enterprises of the association were small and medium, so they had found it hard to access bank loans.

“Enterprises said their loans are due, they cannot get new loans at an unchanged rate of 12% a year because a variety of fees cause the lending rate to surge to up to 18%. We cannot afford such a high rate,” she added.

Chi noted members of the association had been operating perfunctorily over the last six months, and that if banks did not cut lending rates, the competitiveness of local enterprises would erode.

Sharing Chi’s view, Nguyen Thi Hong, vice chairwoman of the city government, said the central bank should remove the ceiling borrowing rate.

“Giving banks more low-cost capital and helping them reduce cost will contribute to lowering lending rates. The city government petitions the central bank to consider reducing compulsory reserves for banks and support lenders via open market operations and refinancing,” Hong said.

Central bank governor Nguyen Van Giau said some banks had agreed to lower their rates to 14-15%, equivalent to 2007 levels. The Prime Minister has allowed banks to apply negotiable rates to those projects assessed as sound, he added.

The new lending rates above remain high but are lower than the current levels quoted by banks.

Under Government Resolution 18/NQ-CP, the central bank will instruct lenders to give priority to importers of essential goods which are not produced in Vietnam while restricting loans for importers of luxury goods, Giau said.

“We’re waiting for the Ministry of Industry and Trade to give a list of goods subject to priority foreign currency loans. When the list comes out, I will ask banks to abide by the Government’s resolution,” Giau said.

The Governor told the Daily on the sidelines of the meeting that commercial banks managed to lower lending rates on their own and that the central bank had not pumped capital into the banking system.

For credit growth which is capped at 25% for this year, Giau said, the central bank would tell banks to limit monthly credit growth to 2.2-2.3% from now to the end of the year.