Interest rates unlikely to be dragged down

The government just made public Resolution 03/NQ-CP guiding the State Bank to come up with measures which could help lower bank interest rates in a suitable time.

“Though the consumer price index has been eased in recent months, it would be hard to bring deposit rates to less than 10 per cent this year since the most important precondition for lowering interest rates is banks’ liquidity which remains rather low,” said a state bank director.

In fact after the traditional Lunar New Year, banks have raced to roll out promotional campaigns and even overlooked state ceiling deposit rate regulations to attract depositors. Hence, actual mobilising rates have mounted to 18-19 per cent, per year against regulated ceiling rates of 14 per cent, per year.

“The rates cannot go down unless the central bank takes iron hand towards violators,” said the executive.

In respect to present bank system’s liquidity situation, senior banking expert Nguyen Tri Hieu said: “When will bank rates be eased is not predictable as banks incur liquidity tension even in the face of high raising rates.”

Can Van Luc, senior expert for BIDV’s Management Board, said it was essential to rein in inflation and improve bank liquidity.
“Hence, central bank should continue refinancing banks through open market operations and shortly restructure underperformed banks, avoiding poor liquidity practices to afflict the whole banking system,” he said.

State Bank chief Nguyen Van Binh, however, held a positive view saying that banks’ rates could go down to 10 per cent, per year by the year’s end if inflation was cut to 9-9.5 per cent.

Accordingly, the State Bank has set forth key tasks for 2012 as ensuring bank liquidity, holding dong currency value and easing lending rates.

“When the root of the problem was detected I believe we could address it. Though the task is tough, with drastic actions by the whole political system Vietnam’s economy could surpass this challenging time successfully,” said Nguyen Duc Kien, National Assembly Economic Committee deputy chairman.

In fact, some bigger players like Agribank, BIDV and Vietcombank began to relax lending rates by one to two percentage points. Accordingly, the lowest lending rates are reportedly 14.5-16 per cent per year. Agribank honoured 14 per cent per year lending rate on a limited number of agricultural produce exporters.

In a related development, some foreign banks like ANZ and HSBC gave a warning Vietnam should not pull down bank rates or loosen monetary policies since this could see inflation roar back.