Central bank likely okays negotiated lending rate soon

Central bank Governor Nguyen Van Giau met with bankers in Hanoi and HCMC last week to collect their ideas on how to apply negotiated lending rates to short-term loans before officially launching this policy. At this time, banks can only apply negotiated lending rates for medium and long-term loans while loans of less than 12 months still have the lending rate cap of 12% per year. However, most banks have bypassed the regulation to scale up lending rates for short-term loans higher than 12% per year to secure a profit as their input rate is already around 12% per year. Banks said if the State Bank of Vietnam allows them to apply negotiated lending rates for all loans, they can actively adjust lending rates depending on risks relating to each project, and many more enterprises can access their loans. In response to widespread outcries by borrowers relating to high interest rates, the Prime Minister last week instructed the central bank to research and allow credit institutions to apply negotiated rates for all loans, helping to clear capital flow. Governor Nguyen Van Giau told local media after the meeting with southern bankers here on Friday that the central bank had submitted a plan on applying negotiated lending rates to the Prime Minister and it would be announced soon. The governor brushed aside worries on a new wave of rate hikes among banks once the new lending rate mechanism is launched, saying some State-owned banks are offering much lower rates than the market average. “Some State-run banks told me during the meeting they were now lending at rates less than 14% per year,” and some close corporate clients of such banks could even enjoy a preferential rate of 11% per year, he said. “Big joint-stock lenders will compete with State-owned banks (to attract borrowers) by reducing their lending rates, making the interest rates to fall later,” Giau said. At this time, lenders are offering loans at rates of about 16%-18% per year to enterprises but few customers accepted such high rates, resulting in stagnant credit growth in the first quarter this year. Pham Duy Hung, general director of Vietnam Asia Commercial Bank, told the Daily that his bank now lent at 16%-17% per year but few enterprises accepted to borrow money at that rate. “Therefore, we will reconsider the situation and lower lending rates as well as cut borrowing rates gradually in the coming time,” he said. The Governor said the actual mobilized fund in the banking system in the first quarter this year increased by 3.8%, much higher than the expected figure of 1.45% earlier. Meanwhile, the real credit growth in the first three months of the year was 3.34%, higher than the forecast of 2.95% given earlier but still lower than mobilization growth. According to an article posted on the central bank’s website, Governor Nguyen Van Giau said that the State Bank of Vietnam had adopted measures to cool down the interest rate fever on the market such as providing banks with more longer-term capital and in bigger volumes, refinancing and making currencies swap.