A number of commercial banks are unhappy with the State Bank of Vietnam’s instruction to lower interest rates on existing loans to below 15% per annum from July 15.
The instruction was made by Governor of the State Bank of Vietnam (SBV) Nguyen Van Binh at a conference held on July 7 to review the banking sector in the first six months of this year and outline new tasks for the second half.
Commercial banks required to lower interest rates for their existing loans to below 15% per annum from July 15
Under the governor’s instruction, interest rates for new loans must be adjusted based on the new deposit interest rates. The SBV previously slashed ceiling deposit interest rates for the VND from 11% to 9% per year for non-term loans and those with terms of below 12 months; meanwhile, the rate for loans of one year or more will be regulated by credit organisations based on market demand.
Many commercial banks agreed with the governor’s statement, however, some said the SBV’s request would put pressure on commercial banks, adding that interest rate policies should be carried out gradually so that banks can follow.
Le Hung Dung, Chairman of Eximbank said that despite trying to save enterprises, banks can not issue loans to companies which were not eligible, adding that banks would have to select firms which met the criteria for loans.
Dung noted that the SBV needs to clearly stipulate that banks only provide loans for enterprises which aren’t at risk of increasing their bad debts. The bad debts have been on a sharp rise. By the end of May this year, bad debts had grown 4.47% roughly worth VND100 trillion (USD4.76 billion), up 3.07% against late 2011.
Chairman of Vietinbank Pham Huy Hung said the problem was not with interest rates but the efficiency of company operations. He said that Vietinbank was willing to offer lending interest rates of just 12% or even 11% for businesses which operate well.
He also disclosed that a number of banks still offered deposit interest rates of 14%; therefore, lending rates remained high.
Chairman of SeaBank Nguyen Thi Nga said, some real estate enterprises had received bank loans at annual interest of 24%, but the bank had reduced the rate to 20%, but they had still failed to pay their debts. They then asked SeaBank to lower the rate to 12%. When the bank agreed, the companies said that they would consider on this.
Nguyen Phuoc Thanh, General Director of Vietcombank, said currently only 5% out of its total loans had interest rates of over 15%. He said that after the conference the bank will impose lending interest rates of not more than 15% for eligible companies, including those who operate in the areas not encouraged to receive loans. For prioritised areas, lending interest will not be more than 11% and the level will not exceed 12-13% for other fields.