Vietnam banks should cut dollar lending rates: analysts

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With few companies eligible for dollar loans, Vietnam's central bank does not need to be reluctant to cut lending rates, analysts have said.

Long-term dollar loans carry interest rates of 5-7 percent, and short-term loans, 6-8.5 percent.

Cao Sy Kiem, member of the National Monetary Policy Advisory, wanted the central bank to loosen policy to enable companies to borrow more easily.

He dismissed fears that it could throw foreign currency supply-demand out of kilter, pointing out that few companies are eligible to borrow dollars due to the elaborate rules in force.

The central bank only allows such loans to firms that earn in dollars, importers of oil products, exporters, and those planning to invest abroad.

Lowering the interest rates on these loans is something that "needs to be done and done soon" considering that exporters are reversing production cuts, the dong is stable, and foreign reserves are rising rapidly, Kiem said.


A recent report by the Ministry of Industry and Trade said that in the first four months the economy showed signs of recovery, with many firms resuming operations after temporary closure.

Exports stood at $39.5 billion, up 16.9 percent from the same period last year, and imports were up 18 percent at $40 billion.

Analysts said the increase in imports means firms are accelerating operations. 

The general director of a Hanoi-based export company whose market is South Korea wants the interest rates cut to 4-5 percent for short-term loans and 6 percent for others.

Banks would still profit since the deposit interest is capped at 2 percent for individuals and 1 percent for firms, he said. 

But banks say they have to restrict lending to avoid bad debts.

The general director of a joint stock bank, who requested anonymity, said his bank offers loans at 5 percent only to major exporters of key items like rice and coffee.

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