Banks given more reasons to ease interest rates

Some days ago, people had doubts about the possibility of forcing interest rates down. However, now they have every reason to believe interest rates will be lowered.

VnnNews – Just some days ago, people had doubts about the possibility of forcing interest rates down. However, now they have every reason to believe interest rates will be lowered.

Economist argues interest rates should be eased further

Time needed to ease interest rates

< />Banks ease lending interest rates, but small enterprises are wary 

The factor making people feel interest rates will go down is the decrease of overnight interest rates in the interbank market. In the first days of June 2010, overnight interest rates in the interbank market have decreased by some 0.5 percent. On June 2, for example, the overnight interest rate was 6.48 percent per annum, a low rate when compared with the interest rate of 7 percent in May.

The sharp fall of the overnight interest rate means banks have opportunities to mobilize capital at lower cost, which will help them reduce lending interest rates.

Meanwhile, the State Bank of Vietnam has announced it will continue supporting commercial banks to help banks improve their liquidity by providing loans over longer terms, and with greater volume through refinancing activities and the open market operation (OMO).

Last week, the State Bank of Vietnam lent 33,360 billion dong more to commercial banks, raising the total loans passed through the channel to 60 trillion dong. This figure represents an increase of 10,000 billion in comparison with the previous month. With more capital borrowed from the State Bank of Vietnam with low capital cost, commercial banks will be able to lower interest rates.

Prior to that, responding to the fact that some commercial banks ‘broke barriers’ by raising deposit interest rates to overly high levels, the State Bank of Vietnam threatened to inspect banks which apply deposit interest rates of over 12 percent. After that threat was made, some banks immediately decided to ease their interest rates. At Viet A Bank, for example, the current highest interest rate now is just 11.5 percent, applied for a 3-month term, and featuring longer-term deposits. Meanwhile, the bank is offering 11.2 and 11.3 percent rates, respectively, for one and two-month deposits.

At HD Bank, the highest interest rate has been eased to 11.4 percent, now applied for three-month term deposits and longer. Meanwhile, rates for one and two-month term deposits are at 11 and 11.35 percent, respectively.

In related news, a report on socio-economic development in the first five months of the year released by the HCM City Planning and Investment Department showed that outstanding loans have increased vigorously, especially for medium and long term loans.

Statistics showed that by early May 2010, total outstanding loans of the city had reached 571.8 trillion dong, an increase of 29.1 percent over the same period of the last year.

Outstanding loans in foreign currencies accounted for 27.7 percent of total outstanding loans, while these foreign monies increased by 41.5 percent compared to the same period of last year. Outstanding loans in Vietnam dong increased by 24.8 percent over last year.

One noteworthy development is that medium and long-term outstanding loans accounted for up to 45.5 percent of total outstanding loans, an increase of 33.4 percent over the same period of last year, while short term outstanding loans increased by 25.7 percent.

“The increase in the medium and long term outstanding loans shows that businesses have begun borrowing capital to invest in their production,” the report said.

The report also pointed out that mobilized capital increased more slowly. By the beginning of May, local banks had raised 629.8 trillion dong, an increase of 22.1 percent over the same period of the last year.

Source: VietNamNet, Thoi bao Kinh te Vietnam

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