Vietnam rates up as lending set to rise in Q2

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Banks in Vietnam have increased short-term lending rates in the past week, anticipating higher funding demand in the second quarter after lending grew slowly in the first three months of the year, bankers said on Monday.

The overnight dong lending rate rose to 7.45 percent on Monday from 7.31 percent a week ago, and the rate on six-month loans rose to 11.94 percent from 11.88 percent, Reuters data showed.

"More customers are coming and their demand for funds is a bit higher than last month," a banker in Hanoi said.

She said businesses often get their projects rolling faster in the second quarter, after disruptions in the first quarter caused by the lengthy Lunar New Year holiday.

But business executives said they were facing negotiable lending rates of as high as 16-18 percent, which made it tough to make a profit. Bankers and analysts expect lending rates to soften by 2-4 percentage points in coming months. State Bank of Vietnam Governor Nguyen Van Giau suggested there could be action to help bring lending rates down.

"The State Bank will carry out measures to regulate the negotiable interest rates to be in line with the market mechanism," he was quoted as saying in an interview published by the central bank-run Banking Times newspaper on Monday.

Last week the government asked the central bank to try to bring down commercial bank lending rates, a deputy governor of the State Bank of Vietnam said.

The central bank could start injecting more cash into the economy this month to bring down lending rates and help push economic growth up to 6.5 percent, Nguyen Thanh Ha, director of economics analysis at Saigon Securities, said in a report.

Loans in the first quarter grew 2.95 percent from the end of 2009, while deposits rose 1.45 percent, the central bank said on Monday, confirming a ministry report last week.

It did not give any value for loans or deposits.

Banks in Hanoi had raised VND613.06 trillion ($32 billion) as of the end of March, of which they lent VND392.05 trillion, a report from the central bank branch in the capital said.

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