Consumer loan rate remains high in Vietnam

Many banks are racing to bolster consumer loan growth, but the lending interest rates for this market segment remain high, according to Dau Tu (Investment) newspaper on Wenesday.
Apart from businesses, demand from individual customers for capital (for house purchase and repair, car purchase, consumption purpose) in the last months of the year has also been significantly picking up. What is noteworthy is surging demand for instalment loans for house purchases especially in the context of currently affordable condominium prices. A relaxing of lending standards for consumption is, therefore, a positive signal to such borrowers.

For the time being, outstanding loans to non-production are being gradually lowered to 16pct in the end of the year as required by the central bank. Credit institutions that are of available room for credit growth are now making every effort to boost up credit granting.

Consumption loans, for instance, are still available at SeABank’s Cong Hoa Branch (HCM City) for customers with appropriate borrowing purposes which must be ensured during the capital deployment. Remarkably, home buyers could be financed up to 70pct of the house value at this branch. However, negotiable lending rates in dong for individual customers at this office still average at 24 percent p.a.

Similarly, apart from the amount of 1 trillion dong to finance exporters and importers at the preferential rates of 1.5pct-2.2pct lower than the normal ones, ABBank also lowers interest rates for individual customers in production sector from now till the end of the year. Yet, despite a 1.5 percent decrease, negotiable lending rates for such borrowers are still well above 20pct p.a.

HDBank’s outstanding loans to non-production that has now been brought down to 22pct will be lowered to 16pct by the end of the year, according to Dam The Thai, deputy general director of the bank. “Our room for credit to this sector is still available, yet the currently negotiable interest rates of between 21pct and 23.5pct have hampered further loaning”, he said.

Many lenders blame presently high lending rates in dong for individual customers on soaring mobilisation costs. The newly issued Circular 22/2011/TT-NHNN in replacement of Circular 13/2010/TT-NHNN and Circular 19/2010/TT-NHNN that removes the regulation on employing 80 percent of mobilisation capital for lending has, to some extent, bolstered credit granting. However, what is puzzling now is keeping credit growth well under the limit of 20pct and simultaneously gradually lowering outstanding loans to non-manufacturing sectors.

As a consequence, lenders who have plenty of credit room for individual customers could hardly provide massive credit, which thus makes surging lending rates explicable. The common negotiable lending rates in dong to production sector remain unchanged compared to late July 2011 (hovering between 20pct and 25pct p.a).

Surging lending rates combined with tough loan conditions has resulted in a dramatic tumble in outstanding credit to non-manufacturing sectors. The central bank’s statistics revealed that banking credit to the economy as of 30 August climbed 8.85pct over the 2010-end in comparison with the year-on-year figure of 16.9pct, equivalent to 50pct of the expected year’s credit growth rate (15pct-18pct).

The Governor Nguyen Van Binh is confident in the remarkable improvement in credit structure in accordance to the government’s directive. “Despite a steep decline in credit to non-production sectors, such lending will not be encouraged and the outstanding loans must be pull down to 16pct by the end of the year”, he emphasized.

Tags: Vietnam banking industry, Vietnam finance, Vietnam financial, Vietnam interest rates

Posted by VBN on Sep 22 2011. Filed under Banking-Finance. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry