State Bank may lift deposit rate limit in June

At the event, held by the Ministry of Planning and Investment in Hanoi on April 16, participants were told that the ceiling interest rate was considered an instrument to help the central bank control monetary policies.

On April 11, the central bank decided to lower the deposit interest rate by one per cent to 12 per cent per year in a move to help businesses access credit more easily.

According to the State Bank’s earlier announcement, it would continue lowering the rate by one percentage point every quarter with the aim of bringing the rate to 10 per cent by the year-end.

However, participants said the State Bank should put a cap on all commercial bank lending interest rate instead of existing cap on the deposit interest rate.

They said current State Bank policies were administrative and temporary only, including forex market stabilization, the lending interest rate reduction and credit growth rate allocation.

Senior economist Vu Dinh Anh said the State Bank should continue maintaining a cap on the deposit interest rate until the market becomes more stable.

Meanwhile, Truong Dinh Tuyen, former Minister of Trade, said the State Bank should put the cap on both deposit and lending interest rates if the central bank still wants to use such policies.

However, Trinh Quang Anh, a representative from Maritime Bank, said that a cap on lending interest rates might make the situation more complicated as the central bank is unable to force banks to offer loans with low interest rates.

Experts said the existing challenges domestic banks are facing are related to low liquidity caused by bad debts and loans made to the real estate sector.

The slump in the property market was blamed for the bad debts, which in turn, has led to borrower inability to pay back loans.

Unable to collect loans from the real estate sector, alongside the central bank’s tightened monetary policies to curb inflation, banks are hesitant to offer loans with low interest rates.

Stagnation in the domestic real estate market is forecast to last for the next two to three years, the forum was told.

In the past months, many businesses, especially small-and medium-sized enterprises, complained about their inability to access bank loans.

According to the SBV, bad debts worth about 6 per cent of total outstanding loans belong to the nine weakest banks.

At the monthly Government meeting in Hanoi last month, State Bank Governor Nguyen Van Binh said Vietnam now has nine poorly performing credit institutions and banks accounting for 10 per cent of market shares. These banks are now being supervised for purposes of restructuring.