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LENDING & CREDIT | Cesar Tordesillas, Vietnam

BIDV to further cut dong lending rate

Bank for Investment and Development of Vietnam lowered the lending interest rates for Vietnam dong further by 1-2 percentage points from the current 18-19% a year.

The bank's annual interest rate is now 17% at most for normal loans and 15-16% for manufacturers of farm and export products. The short-term rate for riskier areas like stock investment and consumption is 18.5%.

This is the bank’s third interest rate cut in two months after the release of the central bank’s Instruction 02 to cap the deposit rates for Vietnam dong and the U.S dollar at credit institutions and foreign bank branches.

Chairman Tran Bac Ha of BIDV said this rate cut is aimed at assisting the struggling business community. However, it will affect the bank’s profit as BIDV must obey the ceiling deposit rate of 14% as regulated in Instruction 02, he added.

BIDV’s interest rate cut was announced in the context that many small commercial banks are having a hard time with liquidity and must look for supply from the inter-bank market.

Commenting on this issue, Ha of BIDV said the interest rate hike did not mean any problem in monetary policy and banking system. “I believe the inter-bank interest rates will soon go down,” he said.

The State Bank of Vietnam announced on Tuesday liquidity in the banking system had returned to normal after some banks had faced liquidity difficulties in the past few days.

The announcement was made in order to allay concerns over low liquidity at banks due to the recent inter-bank rate spike. According to a source, the inter-bank rate on Monday was at 20-21% for overnight loans, 22-23% for one-week term and 25-26% for one-month term.

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