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Commercial banks ‘playing fair’   2009-01-13 - VnMedia

A lot of commercial banks have lowered the lending interest rates for the contracts signed with clients before, since the basic interest rate has been slashed, paving the way for banks to lower lending interest rates.


Playing fair


In principle, clients have to pay the interest rates written down in the contracts and agreed by the both sides at the time of contract signing.


However, banks have realized that it would be unfair to continue imposing the high interest rate of 21% on clients when the basic interest rate has been slashed to 8.5%.


Some bankers said that if they still insist on imposing sky-high interest rates, both businesses and banks will suffer.


Duong Thu Huong, Secretary General of the Vietnam Banking Association, said: “Commercial banks will only survive and develop if businesses can survive and develop, while they will suffer if businesses meet difficulties.”


Therefore, commercial banks have been trying to ‘play fair’ by lowering the lending interest rates for the credit contracts signed before. 


The East Asia Bank (EAB) has, for the second time in the last one month, decided to slash the VND lending interest rates for the contracts which have been bearing high interest rates since mid 2008. The bank’s highest lending interest rate has been lowered to 18% and then 16.5% per annum after the two times of adjustments.


EAB General Director Tran Phuong Binh on January 12 told the press that the 16.5% rate will be further downed to 15% per annum as of February 1, while some subjects will be able to enjoy softer interest rates.


“We will gradually lower the lending interest rates which will be applied too all borrowers, while they do not have to ask for the rate adjustments. The monthly adjustments will be made based on the average capital mobilization cost and the operation of the bank,” Binh said.


Besides EAB, other banks including Sacombank, Techcombank and VP Bank have decided to share difficulties with borrowers by lowering the lending interest rates for the contracts signed before at high interest rates.


Explaining the move on slashing lending interest rates, Binh said that it is simply because banks cannot run after profit by causing difficulties for enterprises. If banks create difficulties for businesses, they will create difficulties for themselves.


However, Binh said that the bank still needs to consider suitable adjustment steps, otherwise, they can face losses.


The move to be followed by banks


Huong from the banking association said on January 12 that the interest rate adjustment will take place in a wider scale in the time to come.


The Governor of the State Bank of Vietnam on December 31 released the Instruction No 06, asking banks to consider adjusting the lending interest rates to make it fit the current rates.


In fact, Huong said that banks have already spontaneously slashed lending interest rates before the instructions of the central bank came. The banking association, itself, has also called on member banks, considering their operation and health, to share difficulties with banks by adjusting interest rates.


Huong said that the association on January 8 gathered to discuss the issue, where all the member companies agreed on the interest rate adjustments.


However, Huong said that banks will only be able to slash interest rates step-by-step, not slashing rates sharply, as this will relate to thousands of credit contracts and the banks’ difficulties in mobilizing capital at high costs before.

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