14:31 | 16/10/2016 Finance - Banking
(VEN) - Lending interest rates should fall in the last months of this year thanks to abundant liquidity, low interbank interest rates and the credit growth of nearly 10 percent. However this task seems to be hard as commercial banks must meet their business targets.
According to the State Bank of Vietnam (SBV), credit growth reached 9.67 percent by August 2016. While credit growth in the Vietnamese dong increased by 10.76 percent, lending in foreign currencies saw a fall of 0.33 percent. Credit continued to focus on trade and production activities, and priority sectors. Lending for agriculture by August 2016 increased by 6.64 percent compared to the end of 2015, reaching an estimated VND900 trillion. Regarding lending activities following Decree 67, as of August 15, 2016, four state-owned commercial banks signed credit agreements for building 590 vessels and upgrading 73 vessels with total committed amount of VND6.574 trillion.
Capital access through the banking-business connection program has been improved. By the end of the second quarter of the year, more than 540 dialogues between banks and businesses were organized in 63 provinces and cities throughout the country. More than VND800 trillion were committed for loans, a four-fold increase compared to the end of 2014.
The abundant liquidity of the banking system is expected to help reduce lending interest rates in the remaining months of the year. In addition, interbank interest rates in the first ten days of September 2016 remained very low, despite a slight increase.
Although positive signs in the liquidity of the banking system , a fall in lending interest rates is dependent on many other factors. Almost all banks are keen to provide capital for the economy but if businesses do not fully meet the requirements, it is difficult to make disbursement. In addition, bad debt management and careful monetary policy operations to ensure inflation under control are affecting the decline in lending interest rates in the coming time.
According to the Bao Viet Securities Company, the possibility of reducing lending interest rates in the remaining months of the year is not high, especially in a context where commercial banks will raise medium and long-term capital at the end of the year.
According to financial experts, increasing bad debts are also a barrier to prevent a fall in lending interest rates.