Lending interest rates need a delay to reduce substantively and deeply

VCN - Newly released data from the General Statistics Office show that the picture of the economy in the first two months of the year is pessimistic, so enterprises need capital support to improve their resilience.
Expecting a wave of interest rate cuts to support enterprises Expecting a wave of interest rate cuts to support enterprises
Lending interest rates are under increasing pressure Lending interest rates are under increasing pressure
Sixteen banks reduced more than VND15,500 billion in lending interest rates Sixteen banks reduced more than VND15,500 billion in lending interest rates
Lending interest rates need a delay to reduce substantively and deeply
Capital and interest rates continue to be significant problems causing difficulties for enterprises. Photo: Internet

Very few enterprises are willing to take out a new loan

According to a report by the Ministry of Planning and Investment, credit growth only increased by 0.77% by the end of February 2023, less than one-third of the credit growth rate in the same period last year.

Credit growth is slow not because banks lack liquidity or credit growth limit (room) at the end of 2022 but because the problem mainly comes from the capital absorption of enterprises.

Leaders of the State Bank (SBV) explained that credit growth was slow for several reasons. Firstly, the first 2 months of the year coincided with the Lunar New Year; Secondly, many enterprises were still affected by the Covid-19 pandemic; some did not meet the loan conditions, and the orders of many enterprises declined, making the demand for loans not as high as last year. Primarily, credit for real estate increased lower than in previous years.

Talking about the business situation, many import-export enterprises said that they were facing difficulties in orders. Mr Cao Huu Hieu, General Director of Vietnam National Textile and Garment Group (Vinatex), said that most of the enterprises in the group had new orders by the end of February 2023, orders in the following months were very low, available orders trended retail ones with more complex, and along with lower processing prices and high competition. Nevertheless, he forecasted that the garment industry's orders would recover in the second quarter of 2023.

Lending interest rates need a delay to reduce substantively and deeply
Source: SSI

For wood companies, the situation is not good when some comments said that orders had also decreased by 30-35% compared to last year. In addition, a recent survey conducted by the Ho Chi Minh City Business Association in February 2023 with more than 100 enterprises showed that up to 83% of them were facing difficulties. In particular, capital and interest rates continued to be a big problem causing difficulties; 43% of enterprises answered that loan interest rates were high, and 38.2% answered that loan procedures were complicated and took a long time.

Currently, in the market, many commercial banks have launched programs to help reduce lending interest rates with a reduction of 1-2% per year compared to the current interest rate.

In a statement issued on March 6, the State Bank said that banks had committed to reduce deposit interest rates from 0.2-0.5% per year compared to the interest rates of each bank since February 27. 2023 for the term from 6 to 12 months. Therefore, in February 2023, the interest rate level was stable, and interest rates in the market tended to decrease. The average new lending interest rate had decreased by about 0.4% annually; 22 commercial banks reduced their average lending rates.

However, according to experts of SSI Securities Company, this had only appeared on a small scale, with each product being designed specifically for several specific industry groups. Moreover, compared to the same period last year, the lending interest rate was higher by 3-3.5%, causing the deposit and lending interest rates to decrease compared to the end of 2022 but still at a high level compared with the actual needs of the economy. For example, the lending interest rate in the market for ordinary manufacturing enterprises fluctuates at 10-10.5% per year for a 6-month term and 11-12% per year for a 12-month term, while the consumer loan rate has been pushed up to 14-16% per year.

According to the assessment of Dr Nguyen Huu Huan, the University of Economics Ho Chi Minh City, with the current high-interest rate level of 12-14 %/year, very few enterprises are willing to take new loans for investment, production and business. However, the mass of enterprises borrows to solve liquidity problems.

Cutting actual interest rate

Enterprises all expressed their desire to have more favourable interest rate policies for them.

But to fall lending rates, according to experts, there will be a lag.

According to Dr Nguyen Huu Huan, the adjustment of lending interest rates would be differentiated among commercial banks. A wave of a sharp reduction in loan interest rates might occur in large commercial banks because of large credit room and lower input capital mobilization costs. Small commercial banks, which had mobilized deposits with interest rates around 10%/year for long terms over the past time, needed a delay in the next few months if interest rates want to sharply reduce.

Therefore, this expert said that it was expected that the new wave of interest rate decline would be broader and more profound from the end of the second quarter and the beginning of the third quarter of 2023.

Sharing the same opinion, Mr Tran Duc Anh, Director of Macroeconomics and Investment Strategy of KB Securities Vietnam, said that lending interest rates would have a certain lag because it depended on the supply and demand of capital and the demand of commercial banks when credit risk was high, they might require a high net interest margin (NIM) of mobilization deference to have room, and make provision.

Therefore, according to experts, management agencies, banks and enterprises should synchronously deploy solutions to bring the lending interest rate to around 10% per year, helping to provide more support for enterprises. And the economy in the current challenging context. To do so, the deposit interest rate also needs to decrease to around 6-7% per year on average. This interest rate is also suitable when compared with inflation so that the real deposit interest rate is positive, which is beneficial for depositors.

At the Government's regular meeting in February, Prime Minister Pham Minh Chinh requested the SBV to operate monetary policy firmly, proactively, flexibly and effectively; closely and synchronously coordinate expansionary fiscal policies with other policies. Research and organize to reduce interest rates, increase access to capital, increase credit growth towards drivers (consumption, investment, export) and identify priority areas.

The Prime Minister also requested research and management of interest rates reasonably, effectively, and in line with inflation control, cutting interest rates.

By Huong Diu/ Binh Minh

Related News

Year-end credit growth problems

Year-end credit growth problems

VCN - Due to the modest credit growth results in nearly 11 months of 2023, the State Bank (SBV) has decided to redistribute the credit "pie" with the expectation that it will help banks proactively boost lending.
Understanding the "appetite" for flexible loan conditions

Understanding the "appetite" for flexible loan conditions

VCN - The continuous reduction in interest rates is seen as a significant effort to support business recovery. However, small and medium-sized enterprises (SMEs) are still suggesting the need for flexible loan conditions to enhance their access to capital, especially during the peak months of the year-end.
Bank lending interest rates will be cut at appropriate time: SBV chief

Bank lending interest rates will be cut at appropriate time: SBV chief

Reducing interest rates, maintaining interest subsidies, hiking credit limits, and providing unsecured loans to manufacturing businesses are among the demands made by businesses in the south-eastern region to the State Bank of Vietnam (SBV).
Commercial banks have simultaneously reduced deposit interest rates, expecting to stimulate credit demand

Commercial banks have simultaneously reduced deposit interest rates, expecting to stimulate credit demand

VCN - On April 3, 2023, the interest rates ceiling for non-term and term deposits under 6 months according to the new regulations of the State Bank of Vietnam (SBV) have been applied; many commercial banks have also announced their new deposit interest rates.

Latest News

Packaging among sectors with highest growth in Vietnam: insiders

Packaging among sectors with highest growth in Vietnam: insiders

The packaging industry, which is projected to expand 15-20% in the next few years, is among sectors posting highest growth rate in the country, experts said at a press conference held in Ho Chi Minh City on February 29 to introduce the 17th International Processing and Packaging Exhibition and Conference for Vietnam (ProPak Vietnam 2024.)
US extends investigations into wooden cabinets from Vietnam

US extends investigations into wooden cabinets from Vietnam

The US Department of Commerce (DOC) has announced the extension of the deadline to issue the final conclusion on the investigation of the product scope of wooden cabinets imported from Vietnam, according to the Trade Remedies Authority of Vietnam (TRAV).
Will Vietnam

Will Vietnam's seafood pass the IUU inspection in April 2024?

VCN - The 5th inspection on combating illegal, unreported, and unregulated (IUU) fishing in Vietnam by the EC is scheduled for April 2024. Localities are focusing on conclusively addressing existing limitations and restrictions, with an emphasis on implementing urgent tasks and solutions, particularly by April 30, 2024.
Fruit, vegetable exports see green shoots, targeting 7 billion USD

Fruit, vegetable exports see green shoots, targeting 7 billion USD

Vietnam’s fruit and vegetable exports in the first two months of this year surged 38% to about 749.7 million USD, which is expected to peak at nearly 7 billion USD this year.

More News

Tra fish leads Vietnam’s seafood exports to strong January growth

Tra fish leads Vietnam’s seafood exports to strong January growth

Vietnam's aquatic product exports saw a strong start to the year, recording a 60.8% annual increase to reach 730 million USD in January, reported the Ministry of Agriculture and Rural Development.
Agro-forestry-fishery trade surplus up nearly 2.9-fold

Agro-forestry-fishery trade surplus up nearly 2.9-fold

Vietnam earned some 9.84 billion USD from agro-forestry-fishery exports in the first two months of this year, representing a year-on-year rise of 50.3%, and a trade surplus of 2.68 billion USD, up nearly 2.9-fold, the Ministry of Agriculture and Rural Development reported.
3 recommendations of seafood businesses were promptly answered by the Ministry of Finance

3 recommendations of seafood businesses were promptly answered by the Ministry of Finance

VCN - Recommendations of seafood enterprises on declaring, calculating and paying Value Added Tax (VAT) at the commercial business stage for scrap and discarded products; Invoicing for returned goods; VAT refund, has been specifically answered by the Ministry of Finance.
Expected to catch up with the recovery of wood and furniture exports from trade promotion activities

Expected to catch up with the recovery of wood and furniture exports from trade promotion activities

VCN - With great interest from manufacturing businesses as well as international buyers, VIFA EXPO 2024 is expected to open opportunities for businesses to capture the ongoing recovery in the wooden furniture market, world furniture.
Falling rice price is only short-term, upward trend to continue: Experts

Falling rice price is only short-term, upward trend to continue: Experts

The recent falls in rice prices are only short-term and the upward trend will continue in 2024 on limited supply, providing significant opportunities for Vietnam’s rice export, analysts have said.
Businesses urged to seize opportunities to boost rice exports to Indonesia

Businesses urged to seize opportunities to boost rice exports to Indonesia

Vietnamese enterprises should seize the opportunities to increase rice exports to Indonesia which has allocated an additional rice import quota of 1.6 million tonnes for 2024 as dryness linked to the El Nino delayed harvest in the country, according to the Vietnam Trade Office in Indonesia.
Vietnam eyes semiconductor powerhouse status with new workforce scheme

Vietnam eyes semiconductor powerhouse status with new workforce scheme

By 2045, Vietnam will become an important link in the global semiconductor industry value chain with a contingent of engineers and experts capable of meeting the industry requirements in both quality and quantity, said Minister of Planning and Investment Nguyen Chi Dung.
Vietnam’s FDI inflow surges nearly 39% in two months

Vietnam’s FDI inflow surges nearly 39% in two months

Vietnam has attracted more than 4.29 billion USD in foreign direct investment (FDI) in the first two months of 2024, a year-on-year increase of 38.6%, according to the Ministry of Industry and Trade (MoIT)’s Foreign Trade Agency.
Busy export shipments in early spring at southern seaports

Busy export shipments in early spring at southern seaports

VCN - Thousands of containers of export goods left Vietnamese seaports in the early days of Giap Thin spring have marked prosperity and expectations for a successful year.
Read More

Your care

Latest Most read
Packaging among sectors with highest growth in Vietnam: insiders

Packaging among sectors with highest growth in Vietnam: insiders

The packaging industry, which is projected to expand 15-20% in the next few years, is among sectors posting highest growth rate in the country, experts said at a press conference held in Ho Chi Minh City on February 29 to introduce the 17th International Processing and Packaging Exhibition and Conference for Vietnam (ProPak Vietnam 2024.)
US extends investigations into wooden cabinets from Vietnam

US extends investigations into wooden cabinets from Vietnam

The US Department of Commerce (DOC) has announced the extension of the deadline to issue the final conclusion on the investigation of the product scope of wooden cabinets imported from Vietnam, according to the Trade Remedies Authority of Vietnam (TRAV).
Will Vietnam

Will Vietnam's seafood pass the IUU inspection in April 2024?

The 5th inspection on combating illegal, unreported, and unregulated (IUU) fishing in Vietnam by the EC is scheduled for April 2024
Fruit, vegetable exports see green shoots, targeting 7 billion USD

Fruit, vegetable exports see green shoots, targeting 7 billion USD

Vietnam’s fruit and vegetable exports in the first two months of this year surged 38% to about 749.7 million USD, which is expected to peak at nearly 7 billion USD this year.
Tra fish leads Vietnam’s seafood exports to strong January growth

Tra fish leads Vietnam’s seafood exports to strong January growth

Vietnam's aquatic product exports saw a strong start to the year, recording a 60.8% annual increase to reach 730 million USD in January, reported the Ministry of Agriculture and Rural Development.
Mobile Version