The constant fall in interbank interest rates to record low for many days indicated that the capital sources are stagnant and banks are still hard in lending activities.
On late May 30, the overnight lending interest rate in the interbank market touched a new record low of only 0.5 percent per annum (p.a.), the lowest in many years.
According to the data of some banks, the overnight lending interest rate in the interbank market (on late May 30) was at 0.5 percent p.a. for few transactions and it was popularly at 1 percent p.a. for many transactions. These were the lowest interest rates since 2006 so far.
Bank for Investment and Development of Vietnam (Bidv) said that in the interbank market, the imbalance situation between supply and demand has still continued with plentiful supply amidst very limited demand. Transactions on May 29 mainly occurred around overnight to two week terms at the popular interest rate of 1.5 percent p.a.
There were almost no transactions for long terms. The large supply in the market mainly focused on terms of 1-3 months while the demand was very limited, mainly in short terms of less than one month. The interest rates for 2-3 week terms were commonly at 1.2-2.5 percent p.a. and 2.2-2.7% percent p.a. for 3-month term, according to Bidv’s report.
Since early this year, the State Bank of Vietnam (SBV) has made three adjustments on key interest rates, however, in fact, the average lending interest rates are now still high, at around 15-17 percent p.a. for sectors of agriculture and rural areas and exports and it is 19 percent p.a. for other sectors. Therefore, most enterprises find it hard to access bank loans or do not want to borrow, according to BVSC’s report.
In addition, the weak consumer demand together with high inventories in the first months of this year worried many commercial banks about the solvency of enterprises and overdue debts, forcing them to limit credit to ensure the quality of loans. This is also reason for negative credit in Jan-May 2012.
“The important issue for the central bank and government is now not only to lower the interest rates but also have comprehensive solutions to restructure debts for enterprises and increase the demand power in the economy to solve the inventory problem and lessen difficulties for businesses whereby companies will boldly borrow capital for production as well as commercial banks will be able to improve the problem of credit growth”, BVSC’s analyst said.