Viet Nam money: lending rates seen easing further

Tuesday, April 15, 2008
Interest rates on Vietnamese dong loans are expected to ease further this week after BIDV, the country's second-largest lender, announced it would lower rates, the central bank and bankers said.
Lending rates surged in February to 30-40% as the central bank tightened liquidity to combat inflation that hit nearly 20% in March.
Liquidity has since stabilised prompting the State Bank of Vietnam, or the central bank, to cap bank dong deposit rates at 12% and then the banking industry to lower the cap to 11%.
After deposit rates started to ease, lending rates followed suit this month.
The central bank said Dong A Bank, Sacombank STB.HM and Eximbank have cut their monthly lending rates by between 0.05-0.2 percentage point.
Rates on dollar loans were stable, the central bank said in a report reviewing banking activities in the week to last Friday.
But BIDV is pushing lending rates lower.
Chairman Tran Bac Ha announced on Thursday that his bank would cut dong loans by between 1.8-2.5 percentage point from Tuesday and lower its ceiling on dong loans to 15.5% from 18.5% now.
BIDV also said in a statement it would lower the ceiling on dollar loans to 8.5% from 10.6% now.
Vietnam has more than 40 banks, but BIDV and three other state-run banks altogether handle 70 percent of market deposits and lending.
On the interbank market on Monday, major lenders, including BIDV, offered overnight dong loans in a wide range of 5% to 9.5%, against 7.5-9.5% a week ago and 4-7% at the end of March VNIBOR.
Their six-month loans narrowed to 10-11% from 9.5% to 14% on March 31.
Vietnam's central bank let the dong to gain slightly against a broadly stronger dollar on Monday. It set the official exchange rate at 15,955 dong per dollar, or 5 dong up from a week ago and nearly 1% up from 16,114 dong per dollar at the end of 2007.
Last week, the central bank tightened lending in foreign currencies by narrowing the borrowing criteria for foreign exchange loans to try to ease a dollar shortage at commercial banks. (Reuters)