35 C
Ho Chi Minh City
Sunday, June 16, 2024

Three-year zero-interest business loans unfeasible: experts

Must read

HCMC – Commercial banks and experts have said the proposal of providing zero-interest loans for three years to State-run businesses is unfeasible.

To support businesses during the coronavirus pandemic, the Commission for the Management of State Capital at Enterprises has suggested the State Bank of Vietnam make it possible for State-run businesses to benefit from the VND250 trillion credit package through zero-interest loans for three year terms, helping them pay worker salaries and maintain their operations.

Talking to Nguoi Lao Dong newspaper, a leader of the State Bank of Vietnam stated that more than VND100 trillion of this credit package has been disbursed at interest rates lower than usual by 0.5-2.5 percentage points per year, depending on the commercial bank and borrowers.

However, the package does not come from the State budget but from commercial banks. “If interest rates go down to 0%, how can commercial banks pay interest to depositors and cover operation costs? This proposal is unfeasible,” he remarked.

HCMC Development Bank has introduced a credit package worth VND5 trillion with interest rates starting from 7.8% per year, while Bank for Investment and Development of Vietnam has also applied a VND30 trillion credit package with interest rates starting from 6.5% per year.

A banker explained that in funding these credit packages, commercial banks have to mobilize money from individuals and organizations, with interest rates ranging from 5% to 6% per year. “Commercial banks already suffer losses if interest rates go below 7%-8% per year. But to support businesses affected by the coronavirus pandemic, they have to cut their operating costs to offer loans at interest rates below that. There is no way interest rates would be 0%,” he stressed.

Economics expert Dr. Can Van Luc said the current interest rates are already low. The average interest rate was previously 7% per year, but currently, one commercial bank is offering an interest rate of 4.5% per year. “The rates could not be any lower,” he stated.

Moreover, the leader of another bank claimed if zero-interest loans were to be offered to State-run businesses to rescue them, it would be unfair to small and medium-sized enterprises that have had to withdraw from the market due to the pandemic.

More articles


Please enter your comment!
Please enter your name here

Latest articles