Banks ordered to cut interest on old loans
Banks ordered to cut interest on old loans
State Bank of Viet Nam Governor Nguyen Van Binh has asked commercial banks to refinance outstanding loans at lower interest rates in a bid to help businesses facing difficulties.
Addressing a meeting Saturday, Binh said lenders would be expected to offer borrowers better rates effective July 15. Therefore, bankers this week needed to identify new rates and immediately inform their networks to begin implementing the adjusted rates.
"We must be responsible for society as well as protecting our prestige," Binh said. "Maintaining high lending rates is offensive to society."
Binh noted that both deposit and lending interest rates had fallen sharply in the first six months of the years, but these rates were only applicable to new loans. Meanwhile, businesses still suffered under the high rates on older loans, and many were facing insolvency unless they saw some relief.
According to the central bank, bad debts in Viet Nam hit US$5.18 billion as of April, or 4.14 per cent of total outstanding loans, up from 3.06 per cent in 2011.
Binh said interest rates on outstanding loans should be reduced to no more than 15 per cent and should gradually stabilise to match new, prevailing interest rates.
In May, the State Bank lowered the ceiling on deposit interest rates from 15 to 14 per cent per year. Key lending rates were also lowered, with the refinancing rate reduced from 13 to 12 per cent, the discount rate from 11 to 10 per cent, and the interbank rate from 14 to 13 per cent.
Meanwhile, bankers at the meeting raised concerns about the slow rate of credit growth in the first six months of the year. While the annual growth rate of the credit market was previously targeted at 15-17 per cent, most bankers said the more realistic figure was below 10 per cent.
Viet Nam International Bank (VIB) president Han Ngoc Vu attributesd the low credit growth to the economic recession which has resulted in low consumer demand and slowed business production.
According to the State Bank's Ha Noi Branch, credit growth in Ha Noi reached just 2.36 per cent in the fist half of the year, the slowest pace in a decade.
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