Banks' capital disbursement lags
07-OCT-2008 Intellasia | Dau Tu Chung Khoan page 26
Oct 7, 2008 - 7:00:00 AM
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During the last two weeks, the stock market witnessed banks lowering both lending and deposit rates whereby a new interest rate band was established. Lower interest rates are right for enterprises' expectation. However, the disbursement plan is a different issue; banks remain hesitant in lending while borrowers also shun bank loans with high interest rates.
Reviewing the statistics, the whole banking system's credit growth was nearly zero in the third quarter of this year because banks seemed to be more cautious and the lending rate of 21% per annum is the too high for borrowing and payment.
According to latest announcements of banks, prestigious companies with good performance still can access bank loans at 17.5% pa. The interest rate band was expanded from 17.5% to 21% pa. Factually, businesses are trying to seek another capital mobilisation method instead of borrowing bank loans. Cao Si Kiem, chair of Vietnam SME Association said that businesses could easily manage the expected lending rate of 15% pa. Although banks are aware of difficulties of businesses, they have to work out bigger problems. At present, the interbank interest rate is 13% pa so banks have cut down deposit rates strongly since the middle of September. Therefore, it will take some more time to lower both deposit and lending rates from current levels. A strong decline in deposit rates will push depositors to withdraw capital and this move will affect the banks' transparency. So far, achievements of the whole year or previous years will be destroyed if several big loans become bad debts.
General Director of a HCM City joint stock bank revealed that his bank plans to pump capital to support businesses at the year-end based on tightening up lending terms more and minimising bad debts. However, he also admitted, that individual and corporate customers both would make careful calculations before taking bank loans. At the start of September, Asia Commercial Bank (ACB) announced that it will provide 15 trillion dong in loans from until the end of 2008 but its disbursement was very prudential and cautious. For the first phase, ACB offered five trillion dong to some companies, individual business households and individual customers with the interest rate based on disbursement time and credit relationship between the bank and the customers. The lending rate of the programme averaged at 20% per annum. As stated by Pham Trung Cang, permanent vice chair of ACB, after one-month, his bank has disbursed only one trillion dong. In his opinion, disbursement speed of banks in general and of ACB in particular remains slow because the banking and financial markets are realigning to the current economic scenario and companies are starting to plan business and production re-expansion. He estimated, companies' demand for borrowing capital could be higher in the coming months when Tet Nguyen Dan (Lunar New Year 2009) comes. Thus, ACB will continue enhancing capital disbursement plan and adjusting down interest rates to proper levels with an aim to share difficulties with borrowers.
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