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SBV says interest rates now reasonable

Tu Hoang
Thursday,  May 18,2017,22:04 (GMT+7)
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SBV says interest rates now reasonable

Tu Hoang

HANOI - Interest rates of 6-11% per year for Vietnam dong loans and 3-4% for those in foreign currency are reasonable, according to the State Bank of Vietnam (SBV).

Delivering a report at a meeting between the Prime Minister and private business in Hanoi on May 17, SBV governor Le Minh Hung said that compared to regional countries, those rates are acceptable as the rate is 13% in Myanmar, 11.9% in Indonesia, 6.3% in Thailand and 5.4% in Singapore.

The central bank received a total of 29 proposals from businesses in the run up to the meeting, he noted.

Regarding a proposal for lending rate cuts, Hung said interest rates had stayed stable since 2016. In late September 2016, a number of banks lowered deposit rates by 30 to 50 basis points and lending rates by 50 to 100 basis points for priority production and business areas. The current interest rates are much lower than in 2011.

In regard to Resolution 24/2016/QH14 of the National Assembly on the goal of making the average domestic lending interest rate competitive with the rate of ASEAN-4 by 2020, Hung said the central bank will try to keep interest rates stable in line with the inflation control objective. Banks can still bring down interest rates if they cut costs and improve business efficiency.

On the exchange rate, he said the exchange rate between the Vietnam dong and the U.S. dollar had gone up 1.1% to 1.2% on average. But the foreign exchange market in Vietnam is much more stable than elsewhere in the region and the world.

The central bank has bought large amounts of foreign currency, thus taking the nation’s foreign reserves to a record high, he noted.

The central bank will find ways to meet the demand for short-term foreign currency loans to bolster production and business activities in supporting industries, high-tech, agriculture and rural areas, export, and small and medium enterprises (SMEs).

Credit will be prioritized for the manufacturing sector with a ratio of about 80%, Hung said, and key projects will account for 50% of total outstanding loans.

Currently, medium- and long-term loans make up 53% of total outstanding loans, while medium- and long-term capital raised by credit institutions accounts for only 15% of the total, putting pressure on the banking system.

To help inject more funds into the economy, the central bank allows credit institutions to use up to 50% of their short-term capital to make medium- and long-term loans available for corporate borrowers.

Credit grew 18.25% in 2016. This year, high credit growth has been maintained. By the end of April, loans had edged up 5.76% over the end of 2016, higher than the same period last year, with loans in Vietnam dong up 5.87% and those in foreign currency up 4.64%.

In the coming time, the banking sector will continue to concentrate capital on the preferred areas,

The SBV asked the Government and the National Assembly to issue a resolution on settlement of bad debt to create new financing sources for lending to production and business and support businesses to solve their bad debts, said the governor.

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