Small borrowers fear interest rate hike hinh anh 1A transaction is made at Vietcombank's headhquarters in Hanoi (Photo: VNA)

HCM City (VNA) – Individuals as well as small and medium-sized enterprises are apprehensive loan interest rates could rise since banks have kept hiking deposit interest rate since the end of last year.

Pham Van Thanh of HCM City's District 12 has borrowed more than 300 million VND (15,000 USD) from a bank to buy a house, and has to pay a floating interest rate from the second year onwards of the 13-month deposit rate plus 4 percent.

From this month the rate has gone up to 11.5 percent.

Many small and medium-sized enterprises have warned that they will face challenges if banks increase lending rates.

A director of a HCM City-based company was quoted as saying by Nguoi Lao Dong (The Labourer) newspaper that his company has never been penalized for late payment of loan but since it did not report a profit, the bank has downgraded it and imposed a higher interest rate of 11-12 percent.

The situation would worsen if the rate continued to rise, he said.

The newspaper quoted Nguyen Quoc Anh, Chairman of the HCM City Plastic and Rubber Association, as saying that many companies have been apprehensive about making business plans for this year because they fear interest rates could rise.

He hoped the rates would remain steady so that companies feel secure about doing business.

In December banks hiked deposit interest rates, and there has been another round of hikes this month.

For instance, Orient Commercial Joint Stock Bank is offering 7.6-8 percent on deposits of 12-36 months.

Sacombank is offering 4.8 percent for one month, 5.3 percent for three months, 5.6 percent for six months and 6.4 percent for 12 months.

The rates are 0.2-0.3 percentage points up since before Tet, according to the bank.

It is not very clear where things are headed: while bank executives said higher rates would enable them to retain customers who move to banks offering higher interest and so a race to hike rates was inevitable, banking consultant Can Van Luc said banks were merely preparing for the imminent credit growth and there was no fear of a race.-VNA