VietNamNet Bridge – The credit flow has
been running slowly after Tet with few loans disbursed, which has been blamed
on the overly high lending interest rates and the tightened monetary policy.

Very few
businesses can afford the current interest rates of 17-20 percent per annum And
very few businesses can meet the requirements set by commercial banks to be
eligible for loans. Bankers said that with the limited mobilized capital, they
need to become more cautious when selecting clients. Commercial banks have been
told not to set the deposit interest rates higher than 14 percent per annum,
but with  a low interest rate and high
inflation rate, it is very difficult to attract deposits, even when other
investment options remain gloomy.

General
Director of a HCM City-based bank has predicted that the credit growth rate in
2011 will slow down in comparison with 2010, because the monetary policy has
been tightened right since the beginning of the year. The interest rates are
not likely to decrease soon, while the stiff competition in capital
mobilization has forced banks to balance their capital sources and ensure
liquidity. Therefore, banks will not be able to offer many credits.

Dau tu
newspaper has quoted Deputy General Director of the Asia Commercial Bank ACB Do
Minh Toan as saying that the lending interest rate offered by the bank is 18.5
percent at the highest. However, ACB is selective about borrowers. Meanwhile,
the demand for loans is not high in the first months of the year, because
businesses still hope that the interest rates would go down as the result of
the drastic measures applied by the Government and the State Bank of Vietnam.
Enterprises have delayed their expansion plans, hoping they can borrow at lower
interest rates later.

“I think
that the growth rate of outstanding loans in the first quarter of 2011 will not
be high,” he said.

Chair and
General Director of Alta Hoang Van Dieu said that Alta is an export company
with long term relations with some banks, therefore, it can borrow money at a
preferential interest rate of 17 percent per annum. “However, with the input
material costs having increased by 30 percent, plus the high interest rates,
the company does not plan to expand its production. For 2011 we only dare set
the targetsequal to the last year’s,” Dieu said

Representative
of an enterprise said that on average, businesses have to pay 19-20 percent
interest rates. Therefore, they have to think carefully before borrowing. “If
their profitability is higher by only 2-3 percent than the interest rates,
businesses will take losses un able to cover the expenses,” he said.

An expert
from the National Advisory Council for Finance and Monetary Policies has warned
that if the interest rate in 2011 remains at 20 percent per annum, Vietnam’s
industrial production will shrink, which will lead to the job reduction and
exports decreases.

The State
Bank of Vietnam has released
the report on the credit growth in the first month of the year, which showed
the decrease of the deposits at credit institutions, the significant increase
of dollar outstanding loans and the reductions in both Vietnam dong
mobilized capital and outstanding loans.

The total
deposit balance at credit institutions by January 21, 2011 had been reduced by
2.46 percent from the previous month. Especially, the deposit balance in Vietnam dong
dropped by 4.12 percent, while the deposit balance in foreign currencies
increased by 4.43 percent.

In
principle, in the first months, both the mobilized capital and credit growth
rates are at low levels. In the days just before Tet, businesses withdraw their
money from banksTherefore, in order to ensure liquidity, banks dare not
increase the number of loans? Increase the interest rates

However,
analysts say that the sharp fall of the deposit volume of up to 2.46 percent is
a problem, given the increase in the number/interest rate in January 2010 by
0.3 percent, while the 0.43 percent in credit growth rate in January 2011 is
also lower than the one percent growth rate in January 2010.

Meanwhile,
the outstanding loans in foreign currencies have increased by 2.37 percent,
continuing the tendency triggered in 2010. This has been blamed on the big gap
between the Vietnam
dong and the dollar lending interest rates.

C. V