After maintaining high levels for several months with a peak of 25 percent per year, lending interest rates have gone down thanks to a number of favourable factors.

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

In addition, banks have lowered deposit interest rates to 16-18 percent per year, instead of 19.5-20 percent 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 percent per year, standing at 17.3 percent on average at State-owned commercial banks and 19.7 percent 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 percent 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 percent per year lower than normal rate for VND loans and 0.5 percent 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.

Many seafood businesses said that high interest rates were one of the basic reasons for pushing production costs of Vietnam ’s frozen shrimps higher than those of regional countries by 1-1.5 USD per kilo, causing disadvantages for local businesses competing with ASEAN rivals.

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

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