Rates up on increased loan demand

Vietnamese dong lending rates have risen slightly in the past week due to higher month-end loan demand, but bankers said on Monday they did not expect much change this week as banks had ample cash.

Businesses complained that lending rates of around 18 percent were prohibitive, while banks were reporting trouble attracting deposits due to a cap on rates.

The one-week lending rate inched up to 8.21 percent on Monday from 8.20 percent last week, while the rate on one-month loans was 10.63 percent, up from 10.57 percent, according to Reuters data on fixings of interbank offered rates.

Two-month, three-month and six-month rates also inched up after easing on Thursday and Friday but overnight dropped to 7.31 percent from 7.40 percent.

“Demand for loans increases slightly at the end of the month when banks settle their loans, but it did not go up significantly in the past week,” a trader with a Japanese bank said.

A trader with a Vietnamese joint-stock bank in Hanoi said banks had ample cash. “I don’t expect rates to go up or down suddenly this week,” said the trader, who declined to be identified by name.

Credit growth had not picked up due to difficulties banks were having raising deposits because of a rate ceiling of 10.5 percent, state-run Lao Dong newspaper said on Monday.

The central bank said on March 25 it would hold its base rate at 8 percent in April, the fifth consecutive month at that level. That meant commercial bank deposit rates would officially have to stay below 10.5 percent and lending rates for short-term loans under 12 percent.

Negotiable lending rates for medium- and long-term loans ranged from 14 to 18 percent, media reported.

Many company executives have said they could not afford to take loans at rates hitting 18 percent, state-run newspaper Sai Gon Giai Phong said on Friday.

Some executives have said corporate profit margins would be around 10 percent this year, the newspaper quoted some as saying.

In late February, the central bank allowed commercial banks to lend at negotiable rates for medium and long-term loans in certain sectors.

VIETNEWS

Tags: Vietnam finance news, Vietnam interest rates, Vietnam loan