High Interest Rates Freeze Vietnam Credit Growth
Credit growth at commercial banks has been slowdown this month due to high interest rates of between 17% and 20% per annum for the dong-denominated loans.
“Credit growth at our bank has stopped for a month as we scrutinized loan applicants’ willing to borrow at such inflated rates”, said Nguyen Phuoc Thanh, general director of Vietcombank.
Though Vietcombank still has credit room, the partly-privatized lender has been skeptical to boost up credit growth on concerns of credit risks as lending interest rates climbed up to 20% per annum, he said.
Most other local lenders share the same story, especially after deposit interest rates are capped at 14% per annum.
Banks had to raise interest rates to curb lending to ensure liquidity and most of them plan to resume lending after the Lunar New Year festival.
Interest rates began rising after the central bank raised the benchmark interest rate to 9% in Nov from previous 8% and, to some extent, allowed banks to set their own interest rates to attract more depositors while inflationary pressure grew.
The central bank’s move is in line with the Government’s directive to put inflation under control.
Le Xuan Nghia, vice chairman of the National Financial Supervision Committee, said that the Government would give top priority to tackle inflation and forex problems next year.
Once the inflation problem was solved, the interest rate issue would cool down and the stock market would grow in a more stable manner, Nghia said last Saturday.
SBV Governor Nguyen Van Giau earlier estimated that the country’s credit growth would expand between 25% and 27% this year, compared to as high as 37% last year. (Saigon Marketing)
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