Vietnam’s interest rates drift downwards

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Interest rates that orient lending interest rates, such as the government bond interest rate, fell to 12 per cent per year and the inter-bank interest rate dropped to 14.5 per cent per year for a 7-day term and 15 per cent per year for a one-month term.

In addition, banks have lowered deposit interest rates to 16-18 per cent per year, instead of 19.5-20 per cent as in previous months, under the State Bank of Vietnam’s credit tightening policy.

With these moves, bank lending interest rates have been successively reduced by 0.7-1 perc ent per year, standing at 17.3 per cent on average at state-owned commercial banks and 19.7 per cent in joint stock banks.

Several large banks have launched more lending packages or applied preferential lending policies for small and medium-sized enterprises, such as Maritime Bank with a decrease of 0.5 per cent in its lending interest rate for businesses that meet the bank’s financial standards.

The Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank) has offered garment, footwear and mechanical manufacturing businesses interest rates 2.5 per cent per year lower than normal rate for VND loans and 0.5 per cent reduction for USD loans.

Despite modest declines, the current lending interest rates have created opportunities for many industries which are operating in moderation due to lack of capital, including agro-seafood processing for export, to access bank capital.

According to the State Bank, the production sector’s outstanding debts in the first six months of the year rose 10.79 per cent compared to late 2010, accounting for 83 per cent of the country’s total outstanding debts. Of this, agricultural and rural credits increased by 24.96 per cent and export credits were up 25.77 per cent.

It was unlikely lending interest rates would fall significantly in the near future, due to difficulties in mobilising capital sources, said economist Bui Kien Thanh, adding that the market needed capital regulation from the State Bank to reduce lending interest rates.