Lending interest rate hardly to decline, experts say

The credit growth rate of commercial banks is relatively low in the first quarter of the year, but many lenders still offer depositors the interest rates that are higher than the central bank’s 14 percent cap, experts said.

Clients visit a HCMC-based branch of Asia Commercial Bank. Some banks offer depositing rate higher than the central bank’s 14 percent cap through negotiation (Photo:Minh Tri)

Statistics from the State Bank of Vietnam show that the outstanding loan of banks in Ho Chi Minh City reached VND740 trillion (US$37 billion) in the first three months of 2011, a year-on-year increase of 31 percent.

Of the amount, the total amount of dong loans rose 27.2 percent and the dollar loans moved up 41 percent year-on-year to VND214 trillion.

The total deposit of commercial banks increased 30.3 percent year-on-year to VND809 trillion ($40.45 billion), of which the amount of dong deposits increased 30.4 percent to VND580 trillion.

Analysts said it was normal when the credit growth was slow in the first quarter as the demand for loans on production of businesses was often low at this time every year. Especially, the lending rate of commercial banks –18-22 percent per annum - remains very high this year.

According to the central bank, the depositing interest rate in the first three months of this year is steadier than the last quarter last year, with the rate on dong deposits amounting an average of 13.4 percent per annum and the rate on US dollar deposits reaching 4.2 percent.

However, an investigation of Dau Tu Tai Chinh Newspaper reveals many lenders are eager to offer higher depositing rates through negotiation.

At a transaction office of the Bank for Investment and Development of Vietnam, clients who want to deposit VND1 billion ($50,000) or more in three months will be recommended a interest rate of 17 percent per annum.

A transaction office of TrustBank followed a similar pattern, recommending a depositing rate of 18 percent per annum to clients who want to deposit VND1 billion ($50,000) or more in three months.

The State Bank of Vietnam last month recognized, for the first time, the rate cap on dong deposits that had been established by the bank association. All banks are required to publicly announce their deposit rates and are not allowed to offer perks or cash bonuses that would raise rates above 14 percent, the central bank said.

Financial experts said many lenders were seeking dollar loans with low interest rates from abroad in an effort to reduce their lending rates on the greenback.

The HCMC-based Sacombank and The Netherlands Development Finance Co (FMO) have entered an agreement on a $150 million loan, of which $25 million will come from FMO. The lending with a maturity of 10 years is the first FMO’s secondary lending to a Vietnamese bank.

MariTime Bank and Asia Commercial Bank also said they found out loans with low interest rates from their foreign partners to lend back local businesses.

By Thien Ngan – Translated by Vu Minh

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