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Businesses, individuals still hesitate to borrow money   2009-04-09 - VietNamNet/SGTT

Commercial banks, though pushing up loaning, still saw low credit growth in the first three months of the year. Why?


Consumer credit: 0% interest rate not attractive


Banks offer attractive loans

Phong opened an account at a bank four years ago and he has an ATM card which he has never used. Therefore, Phong said he was very surprised when the bank tried to persuade him to borrow money from it.


Meanwhile, Xuan, a staff of a foreign representative office, related that she once dropped into Prudential finance company to seek information about consumer loans. Since then, she has received a lot of calls from the company, urging her to fulfill formalities to get loans.


For the last couple of weeks, people can easily find copies of the programme on consumer credit being provided by finance companies. The loans can be up to VND8bil for 20 years at maximum.


HSBC has resumed consumer credit since mid march. If applying for loans in the period from March 16 to April 16, borrowers will enjoy the 0% interest rate in the first month.


However, even the 0% interest rate cannot lure customers, because they have to pay 24% per annum in interest rate in subsequent months.


Meanwhile, Prudential finance company offers loans at the interest rate of 17.4% per annum, without asking for mortgaged assets. The interest rates prove to be higher than the rates applied in the period before the credit fever and high inflation. Therefore, consumer loans still cannot lure customers.


Businesses only want interest rate subsidy loans


Businesses still are not contacting commercial banks for loans, even though lending interest rates have been decreasing. They only get loans if they can get interest rate subsidisation.


According to the State Bank of Vietnam, by the end of Q1, the total outstanding loans to the national econmy reportedly had increased by 2.67% only over the end of 2008. The growth rate proves to be very low if compared to the growth rate of 6% in Q1 2007 over 2006 and 10% in Q1 2008 over 2007.


Meanwhile, the credit policies for export companies have become unsuitable and do not encourage exports. Businesses now have to pay 6.9% per annum for the loans, which have become higher than the rates of normal commercial loans, which have fallen to 4-6% only.


The bank’s headache now is that businesses are not borrowing money now, for fear of VND/US$ exchange rate fluctuations. It is also because businesses cannot enjoy interest rate support with US$ loans. In Q1, the US$ loans decreased by 2.24%, while the VND loans increased by 3.9%.


A lot of commercial banks complain that they have abundant dollar capital. While banks cannot push up disbursing dollar capital, the State Bank has cut the deposit interest rate for the excessive compulsory reserves in foreign currencies from 0.5% to 0.1% per annum.

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