Vietinbank, Vietnam's largest partly private lender, will cut interest rates on short term loans to 12.5 percent, holding up its end of an agreement between banks to lower rates.
The bank was the first to announce rate cuts, which take effect on July 1, the Vietnam Economic Times reported Tuesday. Vietinbank's previous lending rates were around 13.5-14 percent a year.
The announcement was made after major commercial banks reached an agreement last week to lower interest rates in July.
The agreement aims to help the government meet a target for economic growth. Lending rates will be lowered to about 12 percent and deposit rates to about 10 percent, according to a statement released by the State Bank of Vietnam.
High interest rates on dong loans have been a serious problem for local companies this year.
The director of a telecom company in Ho Chi Minh City, who asked to be identified only as V., said interest rates still high still high after recent drops.
He said his company is paying 18 percent a year on a VND1 billion loan. As the interest has become too much to bear, his company plans to pay off the loan before its scheduled date. The problem is that the pre-payment penalty charged by the bank is also high, at 0.2 percent a month, which can translate to a huge amount of money for the company, V. said.
Not for all
The director of a seafood company in the Mekong Delta province of Tien Giang said his company had switched to dollar loans this year because interest on dong loans was too high, more than double dollar loan rates.
Local exporters are now facing harsh competition on the global market and they want the lowest borrowing costs possible to ensure profitability, he said.
Commercial banks admitted that although they are trying to cut lending rates, not all clients can have access to cheap loans.
Huynh Song Hao, deputy director of Vietcombank in Ho Chi Minh City, said the lowest rate that his bank can offer at the moment is 12.5 percent, but only to credit-worthy regular clients. For other loans, the rates are around 14.5 percent per year, he sad.
Nguyen Hung, general director of Hanoi-based VP Bank, said the bank will adjust its lending rates in July but not immediately. Right now the lowest rate at the bank is still 14 percent a year and it's only applied to certain exporters, he said.