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| Lending rate climbs over 18pct/yr |
| 15/Mar/2010 Intellasia | Tuoi Tre |
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| 15 Mar, 2010 - 11:08:25 AM |
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Banks said that after applying the negotiated lending rate on medium and long term loans, some customers demanding capital for production investment refused to take bank loans because the lending rate climbed to 18 percent pa.
Factually, banks now are competing to bring more benefits to borrowers and are not hasty in capital mobilisation with high deposit rates because they are still in the surplus of spare capital according to some sources.
State Bank of Vietnam (SBV) reported that state banks raised the lending rates to around 12-14 percent and joint stock banks 15-17 percent. Some offered loans at 18 percent pa. However, many banks admitted that such a high lending rate of 17-18 percent pa surpassed the affordability of enterprises.
Yet, facing such a high loan rate is unavoidable because this is the first time banks are allowed to apply negotiation-based lending rate on medium and long term loans. The general trend is that lending rates will be gradually lowered because banks will have to join a tense interest rate competition in near future.
Quoting Ly Xuan Hai-general director of Asia Commercial Bank (ACB), his bank is in surplus of over 30 trillion dong. Its medium and long term loan rates stand at 15-16.5 percent pa, in which the lending time will be lengthened from seven to ten years. In the current context, 15-16.5 percent pa lending rates are acceptable. At Saigon Thuong Tin Commercial JS Bank (Sacombank), enterprises using the bank's services can take loans at 15 percent pa, others will suffer a higher rate of 17 percent pa.
Despite knowing the medium and long term loan rates is fairly high as for borrowers, but this (high lending rate) is suitable to the current deposit rate benchmark. Banks now have to pay high for deposits (including listed deposit rates, promotion and bonus) plus lending cost of 3 percent pa, so the loan rate must be over 17-18 percent pa for profitability of banking business.
With the advantage of low-cost capital mobilisation, state commercial banks started to cut down lending rates. Deputy Director of Vietinbank HCM City said that the negotiated lending rate at their some branches is applied around 14.5 percent pa on all enterprises. Meanwhile, Vietcombank's loans carry the interest rate of 14 percent pa as for big firms and 15 percent pa on smaller companies.
In fact, it is very difficult to find out borrowers who accept negotiated lending rates. Tran Quang Tuong, deputy general director of Tan Binh Manufacture – Trading – Import Export – Service & Investment Service & Investment JSC (Tanimex) assessed, businesses will face many difficulties as expanding investment in current period because of high investment costs.
Few years ago, facility investment cost 1.5 million per sqm but the cost is doubled because the expense for both construction materials and human resources is increasing strongly. Businesses themselves have to select the projects with high feasibility or seek capital via bond and stock issues, Truong proposed.
A lot of banks admitted this year's credit growth should be considered carefully because they prefer pumping capital into production business to real estate investment.
Although undergoing the difficulties in 2010, enterprises are still afraid of expanding investment production and business. So medium and long term credit will account for a not high ratio in banks' total outstanding loans, Cao Sy Kiem, head of SMEs Association said in a statement.
According to Nguyen Chien Thang director of Scansia Pacific Wood Processing Joint Venture Co, due to the lending rate is too high, so the firm shifted to borrow US dollar loans at 5.5 percent pa, lower 12 percent pa compared with the loan rate of the dong.
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