Bank representatives made
their proposal at a meeting between the Vietnam Bankers’ Association
and 22 commercial banks in Ho Chi Minh City on March 9 to discuss the
implementation of SBV’s Circular 07 allowing banks to apply negotiable
interest rates for medium- and long-term loans.
Most commercial banks
agreed that the application of negotiable interest rates would maintain
supply and demand; provide businesses with more access to loans;
facilitate banks in expanding credit grants to development investment
projects; and improve banks’ income.
However, they proposed that
negotiable interest rates should also be applied for short-term loans
to meet the increasing demand of businesses for such loans and to help
banks improve their revenue.
In fact, medium- and long-term
lending currently accounts for only about 30 percent of the total
lending balance at commercial banks, they said.
Given that the
policy on negotiable interest rates on loans has been applied,
maintaining the 10.5 percent ceiling interest rate per year on deposits
is inappropriate, most banks said.
Many commercial banks said
they currently must mobilize capital at 10.5 percent per annum, but if
counting the compulsory reserve, reserve for liquidity, and management
fees, the price of banks’ capital will be higher than 12 percent per
annum.
Therefore, it is
impossible to make short-term loans at the 12 percent interest rate per
annum as regulated by the central bank, they said.
They also pointed out that
the deposit interest rate on the open market has been higher than 10.5
percent and that on the inter-bank market, the rate has also increased
to 12 percent.
To avoid losses, many banks now only provide medium- and long-term loans, even when there is high demand for short-term loans.
With
the ceiling rate of 10.5 percent on deposits and the 12 percent
interest rate on short-term loans, many banks said they were left with
no choice but to charge more fees on borrowers and seek other measures
to prevent losses.
Prior to the meeting, the
general director of a State-owned bank said, “We still have to manage
somehow, because if we give short-term loans at that rate, we will
surely incur losses.”