Banks finally begin to trim interest rates

Banks finally begin to trim interest rates

VietFinanceNews.com - Four weeks after the deposit interest rate ceiling was cut to 13 per cent from 14 per cent, it was cut by another percentage point last Wednesday to 12 per cent.

Just like last time, banks have started to announce cuts in lending rates too. The Bank for Investment and Development cut then by 1.5-2.5 per cent to 14.5 per cent for short-term loans and 13 – 14 per cent for priority sectors like agriculture and exports.

The HSBC reduced mortgage rates by a percentage point, with the floor rate falling to 17 per cent.

Eximbank Viet Nam has earmarked VND6 trillion (US$290 million) for priority customers such as exporters, manufacturers, small- and medium-sized enterprises, household businesses, and low-income earners to buy houses at an interest rate of 16.5 per cent.

Techcombank will lend VND4 trillion ($192.3 million) to such customers at 15 per cent.

However, rates generally remain high since the cheaper loans are limited either by the amounts allocated or categories of customers.

Sacombank for example earmarked VND1 trillion for loans of up to 12 months for the farming, fishing and forestry sectors at a mere 12 per cent in the first month of the term, then the rates could go up to 19.5 per cent.

A local newspaper quoted Tran Quoc Manh, vice chairman of the HCM City Handicraft and Wood Industry Association, as saying that the one percentage point cut was of little benefit in the context that tens of thousands of enterprises were going bankrupt because of the high interest rates.

There are mutters that banks are the only beneficiaries of the interest rate regime. But it is a fact that a number of banks still illegally offer deposit interest rates of more than the regulated 12 per cent, which pushes up their cost.

There are suggestions that the State Bank of Viet Nam should also cap lending interest rates to ensure that not only banks but also customers benefit.

On their part, banks face a major risk of bad debts since too many businesses are floundering while they have large volumes of products in stock.

http://www.vietfinancenews.com/2012/04/banks-finally-begin-to-trim-interest.html