Commercial banks have raised interest rates on dong loans by between 1% and 2% after the State Bank of Vietnam, the country’s central bank, adjusted the base interest rates up one %age point to 9% on Nov 5.
Interest rates on loans for prioritized sectors ranged from 10.5% per annum to 12.3% per annum last week, business and production sector 12.5%-15.5%, and others 16%-18%, according to a SBV report.
Local banks attributed the lending rate increases to soaring input costs, driven by higher deposit and inter-bank interest rates as the central bank has revised up all major rates by one %age point.
The inter-bank interest rate for terms of between three weeks and three months even surged to 21% per annum in recent days, from around 12% before Nov 5.
Low dong liquidity, caused by the fact that the SBV stopped pumping low-cost funds through the open market operations (OMO) in a move to curb inflation, has prompted the rate to soar.
The central bank earlier said the benchmark rate increase would help tame in inflation. Analysts, however, have raised doubts about the effect of the base rate hike, saying that the SBV’s move seems too late to have impacts on the consumer price index in the remaining months of this year.
They also said higher lending rates would usher in numerous difficulties for enterprises and some would have to reconsider the business expansion plans, and this situation could impact on the country’s growth in a foreseeable future.
Le Tham Duong, head of Business Faculty of the HCM City Banking University, said that every policy had two sides, positive and negative.
“If the Government seeks to curb inflation as the first priority, it must accept lower growth in the future,” he explained.
Vietnam’s credit growth expanded 22.5% in the first ten months of this year while the broadest measure of total money supply, M2, were up 21.29%, compared to respective full-year targets of 25% and 20%. (Saigon Economic Times)
Vietnamese
