Bank loans remain unattractive to businesses

A senior executive of a small bank said his bank had set aside a VND1-trillion credit line for enterprises with an annual rate ranging from 18 per cent to 20 per cent.

However, the banker said, the number of firms asking for loans from his bank has remained inconsiderable over the past month.

With the above lending rates, his institution cannot compete with state-owned or foreign-invested banks in inviting good corporate borrowers.

A HCMC-based executive of Vietnam International Bank (VIB) stated his bank was trying to disburse capital for customers. The problem is that VIB finds it difficult to look for qualified businesses to prevent overdue debts from rising.

For the time being, VIB is offering exporters and importers loans with lending rates 1.5 percentage points lower than normal levels.

Similarly, Oriental Commercial Bank (OCB) since the start of this month has tried to attract clients by slashing interest rates to 18 per cent per annum for all loans within a year.

The lender would be more cautious about giving out credits to minimize bad debts since it was now difficult to have debts settled by customers on schedule.

Meanwhile, Ocean Commercial Bank (OceanBank) has announced a special program targeting clients in fields such as agriculture, fishery and forestry, with a yearly preferential rate 2-3 percentage points lower than those for other loans.

Moreover, the Hanoi-based lender has decided to set aside VND500-billion in credit with the rate of 17 per cent for companies in the southern region.

Speaking to the Daily, Le Xuan Nghia, vice chairman of the National Financial Supervisory Commission, pointed out the glut of capital at local banks given the limited number of borrowers.

This has prompted a large number of banks to buy Government bonds with less than 5-year terms to net a coupon of around 11 per cent a year, Nghia said.

As of last Friday, the total transaction volume of the whole bond market amounted to VND47.575 trillion while the figure only reached over VND73 trillion in all of 2011, according to Bao Viet Securities Co.

Central bank governor Nguyen Van Binh in a press briefing on Monday also said the credit growth rate as of last Thursday had dropped by 1.27 per cent compared to the end of last year.

The governor cited the long Lunar New Year holiday coupled with the slackened capital demand as the 2 reasons for the lower rate.

At a seminar on accessibility to bank loans in HCMC on Monday, local companies attributed the slowing capital demand to high lending rates.

Most of them shared the view that the lowering of lending rates by 1-2 percentage points was still of little significance.