The State Bank of Viet Nam will effect further interest rate cuts soon, Governor Nguyen Van Binh said at a conference held in HCM City last Friday.—VNA/VNS Photo

 

HCM CITY (VNS) — The State Bank of Viet Nam (SBV) will effect further interest rate cuts soon, Governor Nguyen Van Binh said at a conference held in HCM City last Friday.

The conference discussed monetary measures needed to boost socio-economic development in the city.

"Inflation is lower now than at the same time last year, but it can rise again if we do not have effective measures to control it.

"This year, the GDP is likely to be higher than last year's figure. So, if we can keep inflation under 7 per cent the deposit interest rate can be reduced to 7 per cent per year and the lending interest rate will stand at around 10 per cent."

The SBV's main policy this year is to concentrate on accurately restructuring debts, ensuring enough provisions and properly using reserves to handle credit risks.

The bank will also strongly punish credit institutions that do not meet reserve requirements but give out dividends, he said.

To Duy Lam, director of the SBV Branch in HCM City, told the conference that the city's monetary market had been stable in the first three months of the year with interest rates down by between 1.5 and 2 per cent per year over late last year.

"Local banks have applied the lending interest rate of 12 per cent and now 11 per cent to five prioritised sectors. They have also launched several special preferential credit packages with interest rates of 8 or 9 per cent per year."

This has seen credit growth pick up in March, reaching nearly VND858 billion, up 0.81 per cent over late February."

 

The city government has implemented many programmes that aim to connect banks with enterprises, thus helping businesses overcome financial difficulties and banks improve their credit growth.—VNA/VNS Photo

 

Local banks also actively restructured debts so outstanding loans with the interest rates of less 15 per cent per year now account for 83 or 85 per cent their loan portfolio, he said.

In addition, the city government has implemented many programmes that aim to connect banks with enterprises, thus helping businesses overcome financial difficulties and banks improve their credit growth.

Governor Binh noted that HCM City has achieved several growth rates that are much higher than national rates.

Many delegates at the conference said local enterprises still found it difficult to access bank loans. They wanted the central bank to allow more enterprises find low cost capital to run their business.

Le Ngoc Dao, deputy director of the municipal Department of Industry and Trade, said many companies in the city were still stuck with old debts with interest rates of between 15 and 19 per cent.

He also said that the current interest rates of 6-7 per cent per year that local banks were applying for foreign currency loans were too high.

Dao suggested the central bank should also proactively ensure that the lending interest rates are in accordance with the lowered dong deposit rates.

The fact is that there is still a big gap between the lending and deposit interest rates. Many individuals and companies are still suffering lending interest rates of 12 to 15 per cent despite the fall in deposit rates to 7.5 per cent. The banks are arguing that these loans were made when their mobilisation costs were high.

Binh agreed with Dao, saying that the central bank was trying to establish a proper lending interest rate that is appropriate to inflation so as to ensure macroeconomic stability. — VNS