Vietnamese banks refuse to lend

Are sitting on a huge stash of cash and refuse to cut interest rates on loans.

The State Bank of Vietnam, the central bank, said credit growth continued to be negative during January and February at -0.28%. Month-on-month credit growth fell 1.23% in January but rose slightly by 0.26% in February.

Excess capital at commercial banks was the reason for the recent cut in deposit rates at banks including some of Vietnam’s largest banks.

In 2012, the central bank ordered commercial banks to reduce the lending rate on outstanding loans to 15% per year. Despite this, many business firms continued to complain that loans were still out of reach.

The National Advisory Council for Financial and Monetary Policies said lenders could reduce rates to 11% and 13% since banks are finding it difficult to lend at 15%.

State Bank Governor Nguyen Van Binh said all eyes were on inflation in March and April. If inflation was 8%, the State Bank would continue to reduce deposit rates.

“However, the possibility to reduce deposit rates is only 1% and each adjustment might be 0.25%, per year. But, there are many reasons to reduce lending rates,” Binh said.