State Bank removes lending cap
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Techcombank staff handle transactions at the bank's headquarters in Ha Noi. The State Bank of Viet Nam has decided to remove the interest-rate cap on medium- to long-term loans. — VNA/VNS Photo Tran Viet |
HA NOI — The State Bank of Viet Nam has removed the interest-rate cap on medium- to long-term loans, a move expected to end a two-year struggle by banks to maintain liquidity.
It is also expected to bring an end to unlawful lending practices that had banks charging above the interest-rate cap to improve their profit margins.
"Interest rates will increase but the increase will be controlled," said National Monetary Policy Advisory Council member Cao Sy Kiem. "Supply and demand for capital will meet each other at a point of real value 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 Ha Noi not be identified, told Viet Nam News their contract interest for institutions now ranged from a yearly 14-18 per cent, up 6 percentage points against last Friday when it was 12 per cent.
"An average lending interest of 17 per cent, coupled with price increases for gas, electricity, water and even wages, will challenge enterprises," 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 capital so we will have a rare chance to negotiate interest with banks while ignoring how much it costs.
"Personally I think that not many small and medium enterprises could raise new loans at new rates without having difficulties with production or business."
Some economists were reminded of late 2007 when the price for goods escalated and the central bank had to apply the brakes to the money supply after inflation hit a 10-year high of 12.63 per cent. So while approving the central bank's decision, Cao Sy Kiem warned of high pressure to use monetary policy to control inflation. The central bank's decision allows negotiated interest rates for mid- to long- term business and investment loans and short-,mid- to long- term loans for bank cards. — VNS