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June 25, 2017

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Vietnamese banks reluctant to pass on interest rate cut to loan-seekers

The State Bank of Vietnam has lowered the interest rate on short-term deposits (one to six months) from 7 percent to 6 percent annually, a move that would normally result in lower rates for loans from commercial banks. But banks are still concerned about customers' deposit needs and question whether they will apply for business loans.

Tran Quoc Manh, general director of the HCM City-based Sadaco, said that would shy away from giving loans to priority projects.

According to Vietnam Investment Review (VIR) newspaper, many HCM City-based enterprises have been paying interest rates of 9-10 percent for their short-term loans provided by banks with state shares.

With high interest rates, manufacturers earn very low profits because they cannot raise the prices of their products in a difficult economy.

Manh said although the number of orders received by wood-processing enterprises in the city rose in the first quarter, few of them had asked for loans with a high 10 percent interest rate.

Such a rate would not allow them to earn enough profit, he added.

"Banks should set interest rates of 6 to 8 percent for their short — term loans," Manh was quoted by VIR as saying.

In addition to lower interest rates, the central bank should create more favorable conditions for businesses to access these loans, he said.

Meanwhile, customers have proposed that banks should provide "prestige guaranteed" loans by considering the efficiency of customers' business projects. But few businesses have access to these prestige guaranteed loans.

Foreigner Restrictions

The draft amendment of the law on real estate trading has allowed foreigners and Viet kieu (Overseas Vietnamese) to take part in the local real estate market, but foreigners have yet to be permitted to trade houses.

At the 26th meeting of the National Assembly Standing Committee on March 10, the Minister of Construction Trinh Dinh Dung submitted a draft law to the Committee that aims to loosen trading conditions for many entities in the real estate market.

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