The State Bank of Vietnam has removedthe interest-rate cap on medium- to long-term loans, a move expected toend a two-year struggle by banks to maintain liquidity.
It is also expected to bring an end to unlawful lending practices thathad banks charging above the interest-rate cap to improve their profitmargins.
“Interest rates will increase but the increase will be controlled,”said national Monetary Policy Advisory Council member Cao Si Kiem.“Supply and demand for capital will meet each other at a point of realvalue and help create stable factors for credit growth.”
The change would also signal sound policy management and indicate a socialist-oriented market economy.
But removal of the cap also comes with worries about the higher cost for credit among enterprises.
As anonymous sources, who asked that their banks in Hanoi not beidentified, told Vietnam News their contract interest for institutionsnow ranged from a yearly 14-18 percent, up 6 percentage points againstFeb. 26 when it was 12 percent.
“An average lending interest of 17 percent coupled with price increasesfor gas, electricity, water and even wages, will challengeenterprises,” warned Asia Food Co general director Nguyen Van Tan.
“I’m not sure small and medium enterprises can bear such high prices for long,” he said.
ACB Computer Co general director Nguyen Ba Anh said; “We need capitalso we will have a rare chance to negotiate interest with banks whileignoring how much it costs”.
“Personally I think that not many small and medium enterprises couldraise new loans at new rates without having difficulties withproduction or business.”
Some economists were reminded of late 2007 when the price for goodsescalated and the central bank had to apply the brakes to the moneysupply after inflation hit a 10-year high of 12.63 percent. So whileapproving the central bank’s decision, Cao Si Kiem warned of highpressure to use monetary policy to control inflation. The centralbank’s decision allows negotiated interest rates for mid- to long -termbusiness and investment loans an short- mid - to long- term loans forbank cards./.
It is also expected to bring an end to unlawful lending practices thathad banks charging above the interest-rate cap to improve their profitmargins.
“Interest rates will increase but the increase will be controlled,”said national Monetary Policy Advisory Council member Cao Si Kiem.“Supply and demand for capital will meet each other at a point of realvalue and help create stable factors for credit growth.”
The change would also signal sound policy management and indicate a socialist-oriented market economy.
But removal of the cap also comes with worries about the higher cost for credit among enterprises.
As anonymous sources, who asked that their banks in Hanoi not beidentified, told Vietnam News their contract interest for institutionsnow ranged from a yearly 14-18 percent, up 6 percentage points againstFeb. 26 when it was 12 percent.
“An average lending interest of 17 percent coupled with price increasesfor gas, electricity, water and even wages, will challengeenterprises,” warned Asia Food Co general director Nguyen Van Tan.
“I’m not sure small and medium enterprises can bear such high prices for long,” he said.
ACB Computer Co general director Nguyen Ba Anh said; “We need capitalso we will have a rare chance to negotiate interest with banks whileignoring how much it costs”.
“Personally I think that not many small and medium enterprises couldraise new loans at new rates without having difficulties withproduction or business.”
Some economists were reminded of late 2007 when the price for goodsescalated and the central bank had to apply the brakes to the moneysupply after inflation hit a 10-year high of 12.63 percent. So whileapproving the central bank’s decision, Cao Si Kiem warned of highpressure to use monetary policy to control inflation. The centralbank’s decision allows negotiated interest rates for mid- to long -termbusiness and investment loans an short- mid - to long- term loans forbank cards./.
