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State Bank says subsidised loans totalled $8.3bil last week   2009-03-17 - VietNamNet/Viet Nam News

Six finance companies will now be allowed to provide loans at the State-subsidised 4-per cent interest rate.

The companies, named by the State Bank of Viet Nam yesterday, are the Rubber Finance Co; Viet Nam National Coal; the Mineral Finance Co; PetroVietnam Finance Co; Vinashin Finance Co and Handico Finance Co.

The subsidy does not apply to consumer loans and credit cards.

The new announcement of the new providers follows the publication of figures that shows commercial banks had injected as much as VND144.312 trillion (US$8.3 billion) in subsidised loans into the economy by the end of last week, reports the State Bank of Viet Nam.

The volume was VND30.6 trillion ($1.76 billion) or 26.9 per cent higher than at the end of the first week in March.

The central bank's website says State-owned banks and central credit funds have now loaned VND114.54 trillion ($6.58 billion) since the Government-subsidised 4-per cent interest rate was launched early last month.

Joint stock banks have provided VND26.84 trillion ($1.54 billion) and foreign banks and joint-venture banks the remaining VND2.94 trillion ($169 million).

The programme is expected to inject another VND176 trillion ($10.11 billion) for a total of VND420 trillion ($24.14 billion) into the economy this year.

The commercial banks are attempting to raise dong deposits to meet the demand for the subsidised loans and their effort to tap extra capital has prompted a rise in the interest they are prepared to pay for "idle" money.

The State Bank of Viet Nam reports that interest rates for dong term deposits have increased 0.2-0.5 per cent against earlier this month and now average a yearly 6.91-7.74 per cent.

Some banks offer more than 8 per cent for three-year deposits.

(see table)

In contrast to the middle of last year when the banks - seriously short of liquidity - offered the highest interest for very short-term deposits, most longer-term deposit now attract the higher interest.

The banks also plan to issue dong certificates at higher interest rates.

"The higher interest is intended to prepare sufficient capital for the subsidised loans and balance deposit and borrowing rates," said SeABank general director Le Van Chi.

Several bankers discounted suggestions that the campaign to raise dong deposits is likely to spark a new interest-rate war.

"Commercial banks will not be able to raise deposits higher if the central bank keeps the prime rate unchanged because they have to balance the cost of capital 'in and out'," explained Asia Commercial Bank deputy general director Nguyen Thanh Toai.

The cost of borrowing in dong has not changed against earlier this month and ranges from a yearly 8.5-10 per cent short term and 10-10.5 per cent mid to long term.

Average interest for US dollar deposits has fallen slightly from a yearly 0.1-0.25 per cent to 2.04-3.09 per cent.

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