Banks reduce lending rates - Businesses are "fueled"

(Baonghean) - Recently, loan interest rates have "cooled down". Many customers in the province have benefited, and especially businesses have gradually overcome difficulties, rising to effective production and business...

Lacking capital to invest in projects to renovate and upgrade hotels and restaurants and expand some new industries, Hoang Anh Company Limited (Vinh City) applied for a loan of 5 billion VND from the Import-Export Bank - Vinh Branch with a loan term of 10 years. Mr. Hoang Trung Hieu - Director of Hoang Anh Company Limited (Vinh City) said: "After borrowing capital from the bank, the company took advantage of business opportunities, completed the hotel upgrade project, and expanded new service industries. Therefore, it helped increase competitiveness in the hotel and restaurant business sector. The company always complies with the contract with the bank, which is to pay interest on the loan (paid monthly) and the principal of 500 million VND per year. To reduce the pressure on the bank's loan capital, the company has now paid the principal to the bank until 2016 and currently has a remaining debt of 2.32 billion VND".

However, the concern of this company was that the loan interest rate at that time was too high. Due to the agreement to adjust the interest rate at each specific time, in August 2011, this enterprise had to pay interest up to 23.5%/year. After the relevant levels and sectors intervened to "cool down" the interest rate, by July 2012, the Export-Import Bank - Vinh Branch reduced the interest rate for the enterprise to 19%. In October 2012, the interest rate continued to be reduced to 15% and in September 2013, it was adjusted to 14.5%/year, and from October 2013, the bank continued to reduce the interest rate for this enterprise to 13.5%/year. The leader of the Export-Import Bank - Vinh Branch said: "Implementing the direction of the State Bank - Nghe An Branch on reducing lending interest rates for customers, and at the same time sharing difficulties with businesses, the Export-Import Bank - Vinh Branch has carried out many rounds of reducing lending interest rates for customers. Even for some specific customers, we have reduced the interest rate to the maximum to create favorable conditions for businesses in paying interest and principal."

SHB Bank staff - Vinh Branch guides customers through loan procedures.

Also benefiting like Hoang Anh Company Limited, Quyet Thanh Joint Stock Company "More than a year ago, we borrowed more than 10 billion VND from VP Bank (Vietnam Prosperity Bank) with an interest rate of 15.5%/year to invest in a hotel project. Currently, VP Bank has adjusted the interest rate for the company down from 15.5% to 13%/year. It is known that many banks have shared the difficulties with businesses by gradually adjusting the interest rate down for customers.

In 2011, the capital mobilization market was complicated, so customers and especially businesses in the construction investment sector always had to endure great "pressure" on bank interest rates. Many businesses have reported that: In 2011, commercial loan interest rates of some banks reached 24%/year, so the profits of the units were not enough to offset the bank loan interest rates... Faced with concerns about bank interest rates, from 2012 to now, the banking system has made efforts to reduce interest rates, most clearly shown in the State Bank's regulations on reducing deposit interest rates (from March 2012 to now, the deposit interest rate ceiling has been reduced many times, from 14%/year to 7%/year for terms under 6 months) and adjusted to reduce lending interest rates for 5 priority areas: rural agriculture, export, small and medium enterprises, high technology, supporting industry from 15%/year (in 2012) to 9%/year (at present). Along with that, the State Bank also requested commercial banks to gradually reduce interest rates on old debts based on their financial capacity to share difficulties with businesses and individuals.

Ms. Nguyen Thi Thu Thu - Director of the State Bank - Nghe An Branch said: "By the end of October 2013, lending interest rates at state-owned commercial banks were below 13%/year (including both new and old loans). Lending interest rates at joint stock commercial banks also decreased sharply, with medium and long-term interest rates at 13-14%/year, short-term interest rates at 9.5-11.5%/year. With the adjustment of interest rates, it has helped businesses gradually overcome difficulties, strive to produce and do business effectively, and at the same time support the banking sector to reduce bad debts. By October 31, 2013, the total outstanding debt of banks in the province with interest rates above 15% was only 5,096 billion VND (equal to 5.58% of total outstanding debt), outstanding debt with interest rates from 13-15% was 14,714 billion VND. (equal to 16.1% of total outstanding debt), the remaining 78.32% of total outstanding debt has an interest rate below 13%".

Normally, in the last months of the year, the demand for loans increases dramatically, especially for business customers, but recently, the "absorption" of capital at the end of the year is not high and this leads to the situation of banks having excess capital. Therefore, the banking industry is currently actively promoting credit activities, creating favorable conditions for customers to access loans, and at the same time offering many programs to attract borrowers. A typical example is the Ho Chi Minh City Development Joint Stock Commercial Bank, which has allocated 30 million USD for preferential interest rate loans. For import-export enterprises from October 1, 2013 to October 31, 2013, with loan terms of 1-2 months, enterprises can borrow at an interest rate of 3%/year, 3 months is 3.5%/year, 4 months is 3.75%/year, 5 months is 4%/year, 6 months is 4.25%/year.

In addition, from August 21 to December 31, 2013, preferential capital funding for businesses was implemented with interest rates of only 8-8.5%/year, the total preferential package limit was up to 1,000 billion VND (this program is for businesses that need to borrow additional working capital to serve plans and projects for production and business of import-export goods, production and business of businesses... with a maximum loan term of 6 months). Or at the Joint Stock Commercial Bank for Industry and Trade, a credit program from October 7, 2013 to January 7, 2014 worth 2,000 billion VND with many preferential interest rates of only 8.99%/year for a maximum of 3 months. And at Asia Commercial Joint Stock Bank, Joint Stock Commercial Bank for Foreign Trade, International Commercial Joint Stock Bank, Export-Import Bank... also implemented many loan programs with attractive interest rates. However, to reduce the pressure of bad debt in the future, only businesses and individuals with feasible production, business and capital use plans, and the ability to repay debts on time as committed, can borrow capital. Hopefully, this flexible approach will help businesses overcome difficulties and stabilize production.

Hoang Vinh