At a recent meeting the lawmakers said the State Bank of Viet Nam (SBV) had directed lenders to keep interest rates steady and try to reduce them by a further 1 or 1.5 per cent to stimulate credit growth and boost economic development. — Photo VNA

HCM CITY (VNS) — Interest rates on long - and medium-term loans should be lowered by at least 1.5-2 per cent to speed up credit growth and help companies revive, National Assembly delegates from HCM City have told commercial banks.

At a recent meeting the lawmakers said the State Bank of Viet Nam (SBV) had directed lenders to keep interest rates steady and try to reduce them by a further 1 or 1.5 per cent to stimulate credit growth and boost economic development.

But interest rates on long- and medium-term loans stood at rather high levels that many firms could not afford, they said.

Dr. Tran Du Lich, also a member of the National Monetary and Financial Policy Advisory Council, said credit demand would rise this year, but banks needed to cut interest rates to ensure smooth credit flow.

"Inflation this year has been predicted at only 3 per cent. Yet firms are having to pay interest of 11 per cent for long- and medium-term loans, which is irrational. The lending rate should be cut to 9 or 10 per cent [so that] local businesses can afford them.

"With the current 5.5 per cent ceiling on deposit interest rates, the lenders' profit will not be affected if they reduce the interest [on] loans.

"The lenders are also enjoying very high interest rates on personal loans (14-15 per cent for secured loans and 34-35 per cent for unsecured)."

A report by the SBV's HCM City branch said though lending rates at most banks had fallen by 1-1.5 per cent since last year, they remained at 10-11 per cent for medium- and long-term loans.

Nguyen Hoang Minh, deputy director of the branch, said these rates were for non-production sectors while lending for production and business averaged 9 per cent interest.

Most banks offer deposit interest of only 4.44-5.02 per cent for under six months, 5.3-5.99 per cent for six to 12 months and 6.03-6.94 per cent for over a year.

Lich said the sharp cuts in interest on short-term deposits forced people to shift to long-term deposits because other asset classes had yet to show clear signs of recovery.

This meant banks had plenty of long-term funds to lend and could easily cut loan interest rates, he said.

Truong Trong Nghia, a lawyer by profession, stressed the need for caution while lending to the property sector to avoid a bubble. — VNS