High liquidity likely to pull down loan interest rates in Vietnam

By Anh Vu, Thanh Nien News

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High liquidity likely to pull down loan interest rates in Vietnam

With liquidity in the banking system relatively high this year and inflation at a low level, banks seem likely to cut lending rates.

The inflation slowed down to four-year and decade lows in January and February, and the State Bank of Vietnam injected VND150 trillion ($7.1 billion) into the system in January.

The central bank’s governor, Nguyen Van Binh, said as a result lending rates are likely to go down by 1-2 percent this year.

He had earlier said at a conference between banks and businesses that lenders would only be able to make a 0.5-percent reduction.

To encourage banks to lower their rates, Binh said the central bank has cut the interest rate on its $1.42-billion housing-loans program from 6 percent to 5 percent.

Leading partly-private lender Sacombank and others like OCB have recently cut their lending rates. Sacombank offers short-term loans at 9-10 percent and medium- and long-term credit at 11-12 percent.

The banking system has been under pressure to cut interest rates to spur lending since 2012.

Last year banks unexpectedly achieved the 12-percent credit growth target, improving from 8.85 percent the year before. But the number was far below the peak of 53.9 percent achieved in 2007.

In the first two months of this year credit growth fell by 1.6 percent.

Binh has urged the government to adopt measures like strengthening the links between banks and the construction materials industry.

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