HA NOI (Biz Hub)  — Lending rates currently hover at 2005-06 levels, less than half the 2011 rates, according to the State Bank of Viet Nam's Monetary Policy Department.

Lending interest rates in Vietnamese dong are currently at 8 per cent for the five prioritised sectors (agricultural producers, exporters, small- and medium-sized enterprises (SMEs), supporting industries and hi-tech businesses).

Other sectors are charged lending rates of 9-10.5 per cent for short-term loans and 11-12.5 per cent for medium- and long-term loans. Businesses with healthy and transparent financial positions and viable business plans can borrow at 6-7 per cent per year.

Last year, SBV Governor Nguyen Van Binh called on credit institutions to cut lending rates below 13 per cent for existing loans. Loans with rates of 13 per cent, which are mainly for consumption, currently account for roughly 17-18 per cent of banks' total outstanding loans, much lower than the rate of 31 per cent from late June last year.

The Government asked the banking industry last month to further lower interest rates on existing loans to remove difficulties for enterprises.

SBV Deputy Governor Nguyen Phuoc Thanh said that the banking industry would follow this directive, trying to cut interest rates of existing loans to roughly 10 per cent from the current 12-13 per cent.

If lending rates remain as high as 13 per cent, firms will not be able to repay loans and will be forced to close, Thanh said, so banks should cut rates to save not only firms but also themselves. — VNS