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Vietnam's banks cut rates to ease fund shortage   2008-07-23 - Bloomberg

 
   
Vietnam Bank for Industry and Trade joined the country's three biggest lenders in cutting rates to ease a fund shortage that threatens to slow economic growth.

The Southeast Asian nation's fourth-largest bank by assets, known as Vietinbank, lowered its lending rate for dong loans by half a percentage point to 20.5 percent.

Vietnam Bank for Agriculture & Rural Development, Bank for Investment & Development of Vietnam and Joint-Stock Commercial Bank for Foreign Trade of Vietnam all also reduced rates this month.

The lenders are responding to pressures from exporters who say the highest benchmark rates in Asia aren't leaving them with enough cash to keep up production.

Vietnam's central bank has raised rates three times this year and restricted credit growth to slow inflation from 26.8 percent.

"The purpose of the decrease is to support clients to stabilize production, contributing to inflation control and sustainable economic growth," Pham Xuan Lap, Vietinbank's Hanoi-based general director, said in a statement on its Web site.

Vietinbank also reduced the lending rate for loans in U.S. dollars to 8.5 percent from 10.5 percent, the statement said.

Under central bank regulations, banks are allowed to set a maximum lending rate of 1 1/2 times the base rate.

The State Bank of Vietnam raised the benchmark interest rate to 14 percent from 12 percent on June 11.

`Difficult to Borrow'

"Twenty-one percent is very high and most local enterprises have been finding it very difficult to borrow money from banks," said Huynh Thi Thanh Van, Ho Chi Minh City-based head of capital markets at Sacombank Securities Co. "If banks don't lower rates, they won't be able to attract clients."

Representatives of Vietnam's associations for furniture, coffee and cacao, cashew nuts, fisheries, and footwear said at a meeting in Ho Chi Minh City last week that their members have serious shortages of cash to buy materials needed to keep production running.

"The main problem the industry is facing is the lack of capital," Nguyen Chien Thang, chairman of the Ho Chi Minh City Association of Handicrafts and Hardwood Industry, said at the conference on July 18. "It is very difficult for us to borrow money now."

Bank for Investment & Development of Vietnam, the country's second-biggest bank by assets, was the first lender to lower rates, from 21 percent to 20.8 percent, on July 8.

Vietnam Bank for Agriculture & Rural Development, the largest bank, and Joint-Stock Commercial Bank for Foreign Trade of Vietnam, also dropped dong lending rates to 20.5 percent and 20 percent respectively, starting from July 18, according to their Web sites.


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