USD lending interest rates are unlikely to fall.

Interest rates on USD deposits for both individuals and businesses are currently at 0%, but with the central bank aiming to shift lending relationships to foreign exchange trading, lending interest rates are unlikely to decrease in the near future.

According to a survey conducted by VnExpress at numerous businesses, interest rates on foreign currency loans have not decreased proportionally to deposit rates in recent days. The lending rates in USD remain around 3.5-5.5% for short-term loans and 4.5-6.5% for medium and long-term loans.

Mr. Pham Ngoc Hung, Vice Chairman of the Ho Chi Minh City Business Association, said that currently, businesses in the association mainly borrow foreign currency to meet working capital needs, provided they have the means to repay the debt. The majority have shifted to buying and selling to mitigate the risk of exchange rate fluctuations. "The group of eligible borrowers is quite limited, and interest rates have remained largely unchanged compared to before the 0% rate on individual USD deposits," he said.

The leader of a company specializing in the import and export of plastic resins believes that current interest rates on foreign currency loans are relatively high and unaffordable for businesses. He suggests that USD lending rates should be reduced to 2.5-3% per year to help companies lower financial costs and enhance competitiveness. This rate would also ensure banks make a profit after deducting funding costs and mandatory reserves.

"Borrowing foreign currency means accepting exchange rate risk, so the interest rate must be attractive enough to compensate for the risk for the borrower to accept it," shared the General Director of a garment company in Tan Binh district.

Interest rates on foreign currency loans remain high.

However, an economic expert believes that even with USD deposit interest rates at 0%, USD lending interest rates are unlikely to decrease because Vietnam still needs to closely follow USD interest rates in the international market. "Given the complex developments in the global currency market and the State Bank's policy of restricting foreign currency lending, lending interest rates are unlikely to fall, and USD credit will not increase significantly in the near future," he assessed.

This view was also shared by Mr. Nguyen Hoang Minh, Deputy Director of the State Bank of Vietnam's Ho Chi Minh City branch. According to him, the agency wants to maintain stable interest rates for foreign currency loans to strengthen the position of the Vietnamese Dong. The prevailing interest rate for USD loans in the city is 3-6.5% per year; with short-term rates at 3-4.5% and medium- and long-term rates at 5-6.5%.

According to Mr. Minh, the recent move by the State Bank of Vietnam to lower USD deposit interest rates for individuals to 0%, coupled with the commitment to stabilizing the exchange rate in the coming period, aims to help prevent the hoarding of foreign currency (and also to reduce the rate of increase in USD deposits) and serves as a foundation for banks to attract VND deposits in the future to support production and business activities.

On the other hand, this expert also expects that under the impact of USD deposit interest rates falling to 0% per year, medium and long-term lending interest rates in Vietnamese Dong will decrease slightly, creating favorable conditions for businesses in need of Vietnamese Dong capital to borrow at lower interest rates, helping to reduce financial costs and lower product prices in the market.

Regarding foreign currency, the State Bank of Vietnam has narrowed the scope of eligible borrowers, restricting loans for importing goods, and by the end of March 2016, will shift the deposit-lending relationship to a buying-selling relationship. A representative from the State Bank of Vietnam's Ho Chi Minh City branch added that in the first 11 months of 2015, foreign currency credit decreased by 15.05%, while deposits continued to increase by over 20%.

Amidst a sharp decline in foreign currency credit, whether customers withdraw USD to convert it into Vietnamese Dong deposits or invest in other channels, US dollar liquidity is still guaranteed in the coming months.

"Therefore, reducing USD deposit interest rates to 0% reduces the incentive to hoard this currency, helps stabilize VND interest rates, and supports the economic recovery process," emphasized Dr. Nguyen Tri Hieu.

According to VNE