The State Bank of Vietnam's headquarters in Hanoi (Photo: VNA) Do Phuoc Tong, Chairman of Duy Khanh Mechanical Company Ltd, saidhis company has a 7-year loan with an interest rate of 9% per year. Afterminuscule decreases, the rate was only adjusted to 8.5% per year.
While new loans have been issued at significantly lower rates, older loans,even for priority sectors such as mechanical engineering, must still bear highinterest rates, especially during a period of economic difficulties.
He said banks also required his company to produce additional collateral orhave their credit limit reduced as banks have been showing concern over thedeclined value of the properties.
"For the past two years, business has been tough, revenue has decreasedsignificantly. Our profit is barely enough to cover the interest," hesaid.
Nguyen Quoc Anh, Director of the Duc Minh Rubber Company Ltd. and chairman ofthe HCM City Rubber Plastic Manufacturer Association, said his company is stillpaying back numerous loans with interest rates as high as 8.5% per year forshort term and 11.2% per year for long term.
When confronted by borrowers, the banks said rate cuts for older loans wouldtake a delay to implement but when asked how long the delay would be, nonecould provide a timeline.
"For businesses, long-term loans are for long-term investments. It will bedifficult for them to produce a profit at higher interest rates," he said.
"Right now, the most pressing issue for businesses is a lackof orders from customers. While they must wait for demand to bounce back, thebanks must support businesses to help them survive with rate cuts," hesaid.
To Thi Tuong Lan, Secretary-General of the Vietnam Association of SeafoodExporters and Producers, said in 2022, the lending interest rate in US dollarwas only about 2% per year, then gradually increased to 4% per year, and nowhas risen to 5.5-6% per year. Meanwhile, exchange rates have been fluctuatingsignificantly, causing disadvantages for companies borrowing in foreigncurrencies.
Explaining why the interest rate for new loans has decreased significantly butthe interest rate for old loans is still too high, a director-general of acommercial bank, said last year after the SCB incident, commercial banks rushedto increase deposit interest rates, some offered even up to 9-10% per annum toattract capital. At the time, many customers chose to deposit for 24 months or36 months, and now banks are still paying high deposit interest rates aspromised.
"This means that the capital raised at this high price must somehow remainprofitable until the end of 2024, even until mid-2025. Even in the secondquarter of 2024, many banks still bear high-cost capital from early 2023.However, as pressure gradually decreases, banks will also gradually reduce theinterest rates for long-term loans for customers," he said.
How long it will take banks to bring down their interest rates also differssignificantly. Banks that aggressively pushed medium and long-term loanproducts at the beginning of 2023 had to significantly increase long-termdeposit interest rates, and now have to pay high interest for high-costcapital. However, banks that did not focus on attracting long-term deposits atthe time will have an easier time now," he said.
Deputy Governor of the SBV Dao Minh Tu said in a recent statement that capitalin the country's banking system remains abundant with full liquidity, evensurplus with interest rates currently at a 20-year low, a great condition forbusinesses to borrow.
However, some commercial banks have not been able to bring down their rates,even as the central bank demanded public disclosure of interest rates, allowingpeople to pick the lowest rates.
"Since the end of 2023, the SBV has been directing commercial banks tofurther cut costs and profit targets to bring down interest rates, for both oldand new loans," said the deputy governor./.
VNA
