Commercial banks have already cut their annual lending rates by 0.5-1.0 percentage points following the central bank’s decision late last week to triple the deposits interest rate to 3.6 per cent per year for compulsory reserves in dong for credit institutions
It is a positive signal making borrowers think about an even greater ebbing of interest rates.
The central bank’s high interest rate was designed to provide banks with more money to lower their lending rates to under the cap of 21 per cent annually.
Vietnam Bank for Industry and Trade (Vietinbank) is lending at 20.2 per cent to regular customers and at 19.5 per cent to special clients while the Vietnam Bank for Agriculture and Rural Development (Agribank) has cut its rates of normal loans to 20 per cent and special loans to 19.2 per cent.
Techcombank is giving soft loans to enterprises that collect farm produce and import production materials. Interest rates on soft loans are between 0.5 and 1 percentage points lower than the rate applied to regular customers.
"We are considering lowering annual interest rates to below 21 per cent for certain terms with certain conditions," said Nguyen Thanh Toai, deputy general director of the Asia Commercial Bank.
Lien Viet Joint Stock Commercial Bank also planned to reduce its rate on soft loans to about 19 per cent yearly.
The Bank for Foreign Trade of Vietnam (Vietcombank) announced the biggest cut. Its dong loan rates dropped by 1.525 percentage points to 19.475 per cent for regular customers and those operating in crucial economic sectors.
The Bank for Investment and Development of Vietnam (BIDV) cut its ceiling rate on loans provided for regular customers from 20.4 per cent to 20 per cent and applied a 19 per cent (down 0.8 percentage points) rate for enterprises operating in crucial economic sectors.
The bank also cut loan rates for exporters by 0.7 percentage points to 18.8 per cent.
Analysts believed that lower lending interest rates will help businesses save on production costs and boost the economy.
As big banks vie to cut lending interest rates, small banks will have to follow suit, or risk losing customers. Several small banks have prepared to cut their deposit interest rates, and then cut loan interest rates.
Vo Van Chau, general director of Orient Commercial Joint Stock Bank, said his bank was considering a capital mobilization plan and the possibility of slashing deposit interest rates by 1.2 percentage points this week, which would lead to lending interest rate cuts.
PG Bank plans to cut deposit interest rates by 0.5 percentage points, according to general director Pham Tuan Tu.
Experts predict small banks will still have difficulties in accessing low cost capital sources from SBV and continue to suffer high capital mobilization costs. Specifically, they rely on capital from the public with a high interest rate of 18.5 per cent per year.
Big banks hold large volumes of intangible assets that they can use to borrow money from SBV at an interest rate of 15 per cent and then re-lend to other banks at 21 per cent. In addition, they can access different capital sources with low interest rates, including those from international institutions. (www.vietstock.com.vn)
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