Monday, September 25 2017

VietNamNews

Vietnamese businesses expect drop in interest rates

Update: February, 05/2015 - 09:12
Workers put the final touches on timber products at Tien Dat Company. Experts said that impending free trade agreements and the Trans-Pacific Partnership would create remarkable growth in export turnover in the coming years.— VNA/VNS Photo Ly Kha

HA NOI (VNS) — Many enterprises expect bank loans' interest rates to drop soon so that they can have better business performance, said Cao Sy Kiem, chairman of the Viet Nam Association of Small and Medium-sized Enterprises.

Kiem said domestic interest rates on loans for production and business activities now range between 7 and 10 per cent per year, which are high, compared with regional levels.

Economic conditions remain tough and the number of companies ceasing operations and going bankrupt has not declined, although lending rates had fallen by about 2 percentage points in 2014 from the levels recorded in 2013.

Late last month, State Bank of Viet Nam (SBV) Governor Nguyen Van Binh had also instructed credit institutions to further cut annual interest rates applicable to medium and long-term loans by 1 to 1.5 percentage points. This was done to assist enterprises and as part of the central bank's monetary policy execution for 2015.

Doan Trong Ly, chairman of the Animal Production Processing Import and Export JSC (Aprocimex), said only Vietinbank has reduced its lending rates from 9 per cent to 8.7 per cent, while other banks have made no moves to lower rates. This firm is still borrowing capital from Agribank at the rate of 9 to 10 per cent.

In addition to Aprocimex, other members of the association are also reportedly getting loans at interest rates of between 8.9 per cent and 10 per cent. Some are even managing to get loans at an interest rate of 12 per cent.

"Banks say interest rates have sharply declined, but that is in comparison with the 18 to 20 per cent levels seen many years ago," an official from Aprocimex said on the condition of anonymity.

He added that it will be hard for domestic companies to compete with foreign firms, which are subject to lending rates of only 2 to 3 per cent.

Some enterprises said medium to long-term lending rates of between 10.5 and 12 per cent are too high in the context of the inflation rate hovering roughly around 4 per cent last year, and that it should have been slashed right at the beginning of this year.

A senior executive at Hanh Phuc Co. Ltd., who wanted to remain anonymous, also pointed out how hard it is for companies to access long-term loans at high interest rates. Many have to seek short-term loans, or borrow money after every three to four months.

SBV Deputy Governor Nguyen Thi Hong has also commented on this lending practice, suggesting that businesses consider suitable investment for adapting to the situation.

National Monetary and Financial Policy Advisory Council Member Tran Hoang Ngan said the amount of loans reserved for small and medium-sized enterprises is currently significant, especially funds allocated for firms in the high technology sector.

But banks will not be able to meet businesses' expectations of a 5 per cent lending rate, based on the overall market conditions at present, he added.

Economic expert Tran Du Lich said it is unnecessary for banks to slash deposit rates in order to reduce lending rates this year, following SBV orders. The current deposit rates of between 5.5 and 6 per cent have already guaranteed profits for banks.

But the head of a joint stock bank reportedly said it is not easy for banks either to cut medium to long-term lending rates because short-term deposits account for up to 85 per cent of all deposits they are managing.

Orient Commercial Bank Deputy General Director Dinh Duc Quang said interest rates can be lowered in the coming months provided that macro-economic stability and good liquidity at banks continues to be maintained.

Many firms have not dared to borrow money although they are trusted by banks, as they are cautious about investments in the current context, he said.

"The important thing now is that authorities from different sectors should help enterprises stabilise operations and sell goods," he added.

Kiem urged enterprises to try and cut employee and sales costs, besides taking advantage of banks' support. — VNS

Send Us Your Comments:

See also: