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Banks fear lack of medium- and long-term capital   2009-04-27 - VietNamNet/LD

It is expected that by the end of April 2009, the total capital mobilised by commercial banks will have increased by 7% over December 31, 2008. Meanwhile, outstanding loans are expected to have increased by 5% only, which means little capital is being used to fund the national economy.


Interest rates stable


Thanks to banks’ profuse capital, lending interest rates have been stable since mid April, according to the State Bank of Vietnam. The VND deposit interest rate applied by state-owned banks reportedly was 7.74% for 12-month term deposits late last week, while the rate was 7.95% for joint-stock banks.


The VND lending interest rates applied by state-owned banks were 8.5-10% per annum for short-term loans, 10-10.5% for medium- and long-term loans. The lending interest rates applied by joint-stock banks were also at 10-10.5%.


US$ loans still in excess


Though the mobilised capital in US$ has been decreasing due to the lower deposit interest rates, banks still have US$ capital in excess due to very low demand for US$ loans. Businesses do not want to borrow in US$ for fear of exchange rate fluctuations. Moreover, with US$ loans, businesses cannot enjoy the interest rate subsidy programme, which applies to VND loans only.


As a result of the economic recession, the demand for importing materials for local production and consumer products has been decreasing. Therefore, businesses do not have a great demand for US$ loans to import products.


Banks fear long-term capital shortage


Commercial banks now have reason to be worried that they do not have enough medium- and long-term capital to disburse to businesses under the government’s interest rate subsidy programme. The majority of the mobilised capital is less-than-12-month term deposits.


People nowadays prefer making short-term deposits to long-term deposits as they fear the local currency’s devaluation and high inflation. Moreover, short-term deposits allow them to get deposits back more quickly to inject in other investment channels. Meanwhile, commercial banks do not have measures to encourage people to make long-term deposits. Banks’ prestige proves to be not high enough to attract long-term capital from the public.


Meanwhile, the demand for long-term capital is expected to increase significantly with the two demand stimulus packages.


Interbank exchange rates down


According to the State Bank of Vietnam, the VND and US$ interbank interest rates have been on the decrease.


As for VND, interest rates are tending to decrease in short-term loans and increase slightly in longer-term loans. The biggest increase, by 0.4%, has been seen with 12-month term loans, while the lowest increase, 0.03%, has been seen with one-month term loans. The average overnight interest rate is now at 6.13% per annum, while the rates of other terms have been hovering around 7% to 8.4% per annum.


As for US$, interest rates have been decreasing on all terms of loans, except the overnight interest rate which has moved up slightly by 0.02% per annum over last week. As such, the highest interbank market interest rate is now 3.29%, applied for six-month term loans.

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