State injects funds to control lending interest rates

The State Bank of Vietnam injected another 11 trillion VND (579 million USD) into the nation’s capital-starved commercial banking system late Tuesday, hoping to stabilise lending interest rates that had skyrocketed following recent deregulation.
The State Bank of Vietnam injectedanother 11 trillion VND (579 million USD) into the nation’scapital-starved commercial banking system late Tuesday, hoping tostabilise lending interest rates that had skyrocketed following recentderegulation.

Of the total, about 8.2 trillion VND (431.57 million USD) was lent tobanks for a 28-day term at an annual interest rate of 8 percent theremaining 2.5 trillion VND (131.58 million USD) was lent for seven daysat a rate of 7.5 percent per year.

The latest bank bailout came as commercial banks had begun chargingbusinesses interest up to 20 percent per year on medium-term loans.

It followed injections of capital into the banking system totalling 60trillion VND (3.15 million USD) from the State social insurance fund in2009, and another 70 trillion VND (3.68 billion USD) from the centralbank in the first two months of this year, aimed at easing a liquiditycrisis in the commercial banking system. Commercial banks havereportedly already repaid a large share of these loans.

At a meeting with commercial bank representatives last Saturday, StateBank of Vietnam Governor Nguyen Van Giau suggested that major banksshould be making loans at 14-14.5 percent per year for medium – andlong-term loans and shorter term loans at just 12 percent.

Many enterprises had companied to the media that they could not affordborrowing costs in excess of 14 percent.
When the central bank allowed negotiable interest rates, Giausaid, the expectation had been that banks would compete to attractborrowers and lending interest rates would fall, but this hasn’t beenthe case./.

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