Banks consider lending rate cuts

Thursday, Sep 29, 2016 19:04

Some banks are considering lending rate cuts after lowering deposit rates this week. — Photo

HA NOI (Biz Hub) — Some major commercial banks are considering lowering lending interest rates after cutting dong deposit rates this week.

Vietcombank, VietinBank, the Bank for Investment and Development of Viet Nam (BIDV) and Agribank on Monday slashed the rates on deposits for terms of less than a year by 0.3-0.5 percentage points.

The rate reduction followed a directive of the State Bank of Viet Nam, asking commercial banks to cut lending rates in order to support production and business activities.

BIDV sources said they were calculating lending rate cuts based on the lower deposit rates, and Vietcombank sources said substantial liquidity now enabled the bank to launch similar rate cuts.

Nguyen Duc Do, deputy head of the Institute of Economics and Finance under the Academy of Finance, said the banks' moves were good signs for the market.

However, a reduction of around one percentage point in deposit rates would have a clearer impact on the lending rate downtrend, he said.

Banking expert Nguyen Tri Hieu said rate cuts by major banks would stimulate smaller banks to follow suit, but it was uncertain whether there would be a wave of interest rate declines.

The majority of small banks still face a capital shortage, making it hard for them to lower deposit rates – a move likely to lessen their competitiveness, he said.

Some banks are offering enterprises preferential loan packages.

Agribank reserved about VND15 trillion (US$666.67 million) to lend businesses seeking short to medium-term capital between now and the end of the year, with lending rates ranging between 5-7 per cent per year.

PVcomBank has launched PV Ready, a medium to long-term lending package targeting small companies with annual revenues of less than VND50 billion.

With this package, an enterprise can borrow up to VND10 billion for a term of up to 84 months to invest in fixed assets. The firm can also borrow the same amount to supplement its liquid capital for a term of up to 48 months.

The bank lent the money at a rate of 8 per cent per year in the first six months of medium to long-term loans. — VNS

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