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Banks slash interest rates but low-fee capital still inaccessible   2008-07-23 - DTCK

The information about lending interest rate cuts announced by leading banks overjoyed enterprises that are thirsty for capital. However, they now realise that the low-fee capital is not reserved for them.

 

 
Vietinbank and Eximbank have announced they will slash VND lending interest rates to 20.5% and 20% per annum at maximum, respectively (the maximum lending interest rate is 21%). Vietcombank late last week also announced it will cut its VND lending interest rate by another 1% per annum to 20%, and US$ rate by 0.5% to 8.5%.

 

Nguyen Phuoc Thanh, General Director of Vietcombank, said that the bank is trying to share difficulties with clients, helping businesses access suitable-cost capital.

 

However, Thanh said, the above interest rates will only be applied to loyal clients and enterprises which make essential consumer products. Vietcombank also provides loans at low interest to fund key projects as per request of the government, projects in agriculture and rural development, and projects on farm and forestry produce and seafood export. As for import companies, the low interest rates will only be applied to the importers of essential products (petroleum, agricultural materials, materials for local production, and medicine).

 

Virtually only businesses can access Vietcombank’s soft loans; it is nearly impossible for individual clients.

 

Similarly, the Bank for Investment and Development of Vietnam (BIDV) has announced it will slash lending interest rates by 0.2-0.6% per annum on VND loans and 1-2% per annum on US$ loans, but for select clients only.

 

According to Tran Bac Ha, Chairman of BIDV, the 0.2% cut is for clients who have credit relations with BIDV branches and transaction points, while the 0.6% cut is applied only to investors and businesses which make essential products as defined by the government.

 

As for US$ loans, the 2% cut is applied to the enterprises which import products in group 1 as stipulated by the Ministry of Industry and Trade: ingot steel, fertiliser, petroleum, plastics, fibre, cotton, chemicals…

 

Explaining why the interest rate cuts are only applied to specific subjects, Ha from BIDV said that the bank is responding to the government’s call to share difficulties with businesses. However, cutting lending interest rates also means cutting turnover and profit; therefore, the bank cannot apply the low interest rates on a larger scale. 

 

As such, arranging capital to serve production and business plans remains unfeasible for many businesses. As deposit interest rates now remain at the high levels of 18-18.9% per annum, it is nearly impossible for banks to slash lending interest rates.


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