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Vietnam Business » Vietnam Financial News » Vietnam companies worry about high interest rate of lending capital

Vietnam companies worry about high interest rate of lending capital

According to the State Bank of Vietnam (SBV), lending interest rates have dropped to 12-13.5 percent per annum for short-term loans and 13-14.5 percent for medium and long-term loans. Firms complain, however, that attractive interest rates are applied only to agricultural areas, or for export companies and loyal clients. In most cases, businesses must still borrow capital at high rates.

Generally, the demand for capital always increases towards the years end, as businesses need to step up production for the end of year and new year sales season. Companies worry that they cannot borrow capital, because lending interest rates are very high. Special interest At joint-stock banks, most normal clients pay 14-14.5 percent interest for short-term loans, and 14.5-15.5 percent for medium and long-term loans. According to Le Thanh Duong, General Director of Truong Son Joint Stock Company, the lending interest rate has decreased by three percent in comparison with five months ago, but it remains relatively high. Duong expected that, with current rates, if production goes smoothly and there are no fluctuations in production costs, the company would make a little profit. If there are any price fluctuations, the company would lose money. To ensure a profit, firms need to borrow at rates of 12 percent or lower. Duong also warned that businesses nowadays must think carefully before borrowing money, and that high lending interest rates remain a barrier for companies to access bank loans. In fact, commercial banks have been trying to slash rates to expand credit in the last months of 2010. They have offered lower interest rates for some, and dropped their lending requirements. An Binh Bank, for example, has reserved 80 billion dong for a program on lending to small and medium enterprises. Clients can borrow with interest rates lower by one percent than those for normal clients. However, there are not many preferential loans. SBV has repeatedly expressed its determination to ease interest rates, but they have not yet fallen significantly. Bridging the interest gap One solution to help reduce interest rates gradually is the flow of money through open market operation (OMO). However, bankers say OMO capital can only aid liquidity, but will not assist banks in reducing demand for mobilizing capital from the public and enterprises. According to Hoang Viet Phuong, a senior executive from Maritime Bank, the central bank only lends money for seven days, 14 days, and 28 days, and no individual or business wants to borrow capital under such terms. Very few people want one month loans and most borrow for 3-8 months. Therefore, commercial banks only use OMO capital in case of emergency. According to Rong Viet Securities Company, the plan to reduce the interest rates to 10 (deposit) and 12 percent (lending) is facing short-term difficulties Maritime Bank has reported that deposits fell by 1000 billion dong within one week. Every day, banks officers see loyal clients withdrawing money to deposit at other banks with higher interest rates. As a result, many commercial banks dare not ease deposit interest rates in order to ease lending interest rates. Phuong admitted that Maritime Bank is still lending at 13-16 percent, saying that it is very difficult to ease rates at this moment. Besides, banks must pay too many "additional fees" in seeking capital. The "additional fee" is understood as the commission banks must pay to businesses with high volumes of deposits. The additional fees have made capital costs expand, so bankers complain that they cannot ease lending interest rates.

Vietnam Business And Financial News Network. Source [english.vietnamnet.vn]

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