Greenback loans get tongues moving

The demand for firms’ dollar-denominated loans often hikes by the year-end since these loans get more reasonable interest rates versus dong lending.

Orient Commercial Bank (OCB) deputy director Pham Linh said firms exporting agricultural produce could borrow greenbacks at 6-6.5 per cent per year only as this was one of OCB’s priority support areas.

HDBank deputy director Pham Thien Long assumed businesses with dollar raising sources retained an appetite towards dollar loans because the exchange rate had proven fairly stable in the year to date. Meanwhile, businesses importing production materials for sale in the domestic market had to buy the greenbacks for payment purposes as they did not have dollar-raising sources for payment since under State Bank  Circular 03/2012.TT-NHNN dated March 8, 2012 and effective from May 2, 2012, these firms were illegible to borrow greenbacks at banks.

That is why albeit the demand for dollar loans escalated, banks still found hard to boost lending.
Besides, a big gap in the mobilising rate of dollar and dong deposits (2 per cent versus 9 per cent as regulating ceiling rates) made banks struggle to lure depositors.

In fact, many people had converted their bank deposits from dollars into dong to enjoy higher interest rates. For over one-year dong deposits, they even benefit from higher-than-regulated ceiling rates of above 10 per cent, even 13 per cent, per year.

State Bank Ho Chi Minh City branch office figures show that mobilising in US dollars by city-based banks shed 9.62 per cent in the first nine months of 2012 against end of 2011 whereas that in dong hiked 11.5 per cent.

The branch’s deputy director Nguyen Hoang Minh attributed the stable exchange rate and big differences in dollar/dong interest rates as the core factor behind augmenting dong deposits at banks in the year ending September.

The branch figures also reflect in the third quarter of 2012 demand for the greenbacks for payment of products and services via city-based banks from firms rose sharply compared to in the first six months.

Minh added that with dollar lending restrictions under Circular 03 foreign currency credit would be unlikely to markedly expand and rising demand for dollar lending could not pill pressures on the exchange rate by the year-end period.