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 Banks’ interest rates a mixed bag

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1alaskan
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PostSubject: Banks’ interest rates a mixed bag   Sat May 05, 2012 9:12 pm

Banks’ interest rates a mixed bag

VietFinanceNews.com - The jury is out on banks’ ceiling interest rate scheme. The ceiling deposit rate was eased from 14 to 12 per cent per year two months ago, but lending rates have yet to be soothed proportionately except a limited number of lower-cost credit packages offered to firms in priority areas with strict requirements.

As a result, current lending rates average 17-19 per cent, per year.

National Monetary Policy Advisory Council member Truong Dinh Tuyen assumed the lending rate would have been pulled down one month after the ceiling deposit rate was eased. However, firms are still scared to borrow.

“It is unreasonable when lending rates did not slide proportionately to eased deposit rates. Preferential credit packages of VND3,000-4,000 billion ($142-$190 million) are just a drop in the bucket compared with $120.8 billion in outstanding loans of the economy in 2011,” Tuyen said.

Tuyen suggested applying ceiling lending parallel to ceiling mobilising rate.

Senior economist Pham Do Chi assumed ceiling mobilising and lending rates would co-exist and proposed to the range between these rates be shortened to just 4 per cent instead of current 6-7 per cent.

Banks, however, hold a different view. Maritime Bank’s Economic Research Centre director Trinh Quang Anh assumed a ceiling lending rate scheme would not be a smart decision.

“A ceiling interest rate scheme should not exist in a market economy. However, applying ceiling deposit rate is important at this point of time and ceiling deposit would be removed in the near term, hence ceiling lending would be unnecessary,” said LienVietPostBank’s deputy chairman Nguyen Duc Huong.

BIDV chairman Tran Bac Ha said it would be almost impossible to introduce ceiling lending due to several reasons.
First, banks set lending rates based on their actual capacity and business plans to ensure healthy performance; and second, two types of lending currently co-exist, one based on common terms and the other negotiable rates. Hence, ceiling lending would be inappropriate except central bank introduced ceiling lending in some priority areas to stimulate growth.

Meanwhile, economic experts said the economy was showing signs of falling into slump. The growth target must go parallel to the inflation taming target. In this context, the State Bank must soon make decisions - either remove the ceiling deposit or simultaneously apply ceiling mobilising and lending rates. In current situation, banks are the only beneficiaries while both depositors and firms suffer.


http://www.vietfinancenews.com/2012/05/banks-interest-rates-mixed-bag.html

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