Twelve Vietnamese banks have agreed to lower their lending interest rates to 17-19 percent, supporting a call from the central bank to make loans more affordable for businesses.
The lenders reached the agreement Friday, after the State Bank of Vietnam promised to be more flexible with banking policies and help commercial banks increase their liquidity.
However, the monetary authority said it will not revise its credit growth target for 2011, which has been set at 20 percent.
A banker speaking on the condition of anonymity said it's likely that banks will be able to cut interest rates on short-term loans, but right now their money supply for long-term loans is still strained.
It's hard for banks to make any promise on medium and long-term interest rates at this point, he said.
Vietnam's government said in a statement last week that the central bank will keep the cap on interest rates for dong deposits at 14 percent. The central bank on Friday, once again, ordered lenders to respect the cap.
Le Xuan Nghia, vice-chairman of the National Financial Supervisory Commission, said it would not be easy to lower interest rates considering inflation is still higher than 20 percent, but at least small cuts in borrowing costs are now possible.
"Banking liquidity has improved, interbank rates have stabilized, and government bond yields have fallen. So there is a real window for small cuts in interest rates," he told Thanh Nien.
Nguyen Van Binh, the new governor of the State Bank of Vietnam, said earlier this month that the central bank aimed to lower dong lending rates to a range of 17 percent to 19 percent starting from mid-September.
As of August 19 most banks offered loans for agricultural and manufacturing sectors at rates of 16.5 to 21 percent, according to the State Bank of Vietnam.
The central bank is expected to announced specific measures to reduce interest rates at another meeting with commercial banks in September, the Vietnam News Agency reported.