VN central bank urged to cut loan rate

The decision is also aimed at further cutting lending interest rates since businesses still face many difficulties. If the lending rate cut further, it would help spur economic development and minimise the cost for businesses while encouraging depositors to invest in business activities. Despite the deposit rate cut, lending interest rates remained high at roughly 15 per cent, too high for many businesses to afford while consumption remains low, experts said.

Financial guru Nguyen Tri Hieu said if the banking system remained weak and consumption stayed low, the lending interest rate would be difficult to cut.

Experts said cutting interest rates was necessary in the context of the economic downturn, though the move was not strong enough to assist ailing businesses to bounce back.

If businesses were not eligible to borrow money and did not have assets for mortgage loans, while their stockpiles remained high, a further lending interest rate cut would not save them, they said.

Le Diem, chairman of the Vietnam Association of Rural Small and Medium-sized Enterprises, said the central bank’s rate-cut policy was the right move but businesses’ access to cheap loans remained difficult. Most businesses really wanted to borrow money for their production, but they did not know how to access preferential interest rates offered by commercial banks.

Strict and cumbersome rules at commercial banks still prevented many firms from borrowing to invest in expansion.

A director of a wood-processing company in Hung Yen Province said borrowing money to invest in production was not the right solution as their inventory situation remained unresolved.

It was too soon to say how lending interest-rate cuts would impact on businesses, said Hieu, adding that it would take at least three months. The lending interest rate cut really assisted healthy firms only. Lowering lending rates would not be enough to stimulate consumption.