Commercial banks have committed to cutting lending interest rates, but the decreases are not big enough to create a bandwagon effect among companies in Vietnam.

The latest report by the State Bank of Vietnam (SBV) revealed that many commercial banks will lower interest rates, while others have already slashed them.

The number of the banks committed to ease interest rates by late last week reached 15. These include big state-owned banks such as the Bank for Investment and Development of Vietnam (BIDV), Agribank, Vietinbank and Vietcombank. They promised to lend at 14.5-15 percent per annum on average. Some may even offer 12 percent for export projects, but they would also offer higher rates on other kinds of loans.

Meanwhile, big joint-stock banks like Asia Commercial Bank, Eximbank and VIB will set rates at 15 percent per annum at maximum. VP Bank has promised to offer loans at 14.5 percent per annum, while Military Bank 13.7-14.5 percent. Some other joint stock banks will still apply relatively high interest rates of up to 18 percent per annum.

Some commercial banks have made loans at the lower levels already. Vietcombank has funded many projects at 14 percent and Sacombank has begun lending at 13.8 percent for agricultural projects and 14 percent for export projects.

Businesses still complain that they cannot borrow capital and that banks have just made promises without dropping rates in reality. Only a few businesses have been able to access bank loans.

Some companies argue that bank interest rates are just words. The banks consider different interest rates based on the prestige of enterprises and the feasibility of projects. Therefore, it is not so easy to borrow money at the lowest rates.

Bank interest rates are lower by 1-2 percent, but business leaders criticize the rates as still above expected levels. They also claim that the interest rates are not low enough to create a new driving force behind business like the interest rate subsidy program did in 2009.

Financial analysts cite two factors needed to slash interest rates more sharply: reduce input deposit interest rates and more low cost capital to banks through the open market operation (OMO) by SBV. At present, these two factors are not being implemented strongly enough.

There are no signs that deposit interest rates will drop. Most banks are still paying 10.49 percent in interest for deposits. No bank wants to pioneer a sudden move in case they lose clients to other banks.

Meanwhile, the volume of money pumped by SBV Vietnam has decreased recently to 2 trillion dong from 7 trillion dong. Commercial banks are lending previously mobilized capital at high interest rates and cannot slash interest rates sharply.

Rol.vn - Source: Vietnam Net