Vietnam banks lower interest rates on improved liquidity

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Several banks have cut lending interest rates to 17 percent following a new policy that allows banks to lend more from their funds.

Vietcombank said its branch in Da Nang now offers loans of less than one year at only 17 percent. For exporters and agricultural producers, the rate can be lowered to 16 percent, it said.

Nguyen Hoa Binh, chairman of the bank, said other Vietcombank branches will follow suit and cut interest rates.

Hanoi-based VPBank said it has earmarked several trillion in dong loans for manufacturers at rates of between 17 and 19 percent in September.

General director Nguyen Hung said the bank's loans have expanded only 10 percent, leaving room for another 10 percent credit growth through the end of the year. Liquidity for lending will not be a problem, he said.

But Hung noted that for some other banks, it would not be so easy. "Some lenders still have money to lend but they can't because they have reached their credit growth limit of 20 percent already," he told Thanh Nien.

Twelve Vietnamese banks reached an agreement late August to lower their lending interest rates to 17-19 percent, supporting a call from the central bank. In return, the State Bank of Vietnam promised to be more flexible with banking policies and help commercial banks increase their liquidity.

Phan Dao Vu, general director of Bao Viet Bank, said some banks began to cut rates after the central bank took its first step in honoring its end of the bargain.

The State Bank on August 30 lifted a regulation which restricted banks from lending more than 80 percent of their mobilized funds.

"The removal of the restriction will unblock capital flows and increase capital for the market, so the goal of cutting interest rates is now within reach," Vu said.

Ly Xuan Hai, general director of Asia Commerciak Bank, said banks can lower their lending rates together only when none of them tries to break the 14 percent cap on deposit rates to attract more funds.

The central bank needs to be strict with banks breaking the cap to make sure all lenders work towards the same goal of making loans more affordable, he said.

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