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Vietnam dong rates rise; banks curb new loans   2009-12-14 - Reuters

Vietnamese dong loan rates have risen in the past week because of year-end demand and tighter lending conditions as many banks have reached their annual credit ceilings, bankers and businesses said.


On Monday, overnight rates on dong loans rose to 9.86 percent from 9.0 percent a week ago, and the 12-month rate increased to 11.44 percent from 10.75 percent. Interbank rates have gained 0.5-0.86 percentage point in the past week, Reuters data shows.

Vietnam has projected credit growth of around 30 percent this year and the State Bank of Vietnam has asked banks to limit lending after loans at the end of October had risen 33.3 percent from a year before.

Most banks in Ho Chi Minh City, Vietnam's commercial centre, have now reached or exceeded their credit growth limits for 2009, said Ho Huu Hanh, head of the central bank office in the city.

Bankers said they had ceased new lending or were lending only to selective clients, and high year-end demand for funds continued to push up interbank market rates on all lending terms up to 12 months.

"We are facing a shortage of funds to buy coffee beans because our bank has stopped fresh loans," said an executive with a coffee export company in the province of Daklak.

He said his firm often needed funds in December, when it did half of its annual coffee buying during the harvest's peak.

Year-end demand for funds in Vietnam is pushed up by corporate debt repayments, bonuses and consumer spending. The central bank was pumping more liquidity into the system than normal through reverse repos on the open market.

Bankers said deposits were slowing because of a ceiling rate of 10.5 percent set late last month by the largest banks. The central bank has said it would comprehensively inspect banks that offered deposit rates above the market level.

Lending conditions could return to normal after Vietnam marks Tet, the week-long Lunar New Year festival that starts on Feb. 13, Sacombank Deputy Chief Executive Ho Xuan Nghiem was quoted by Monday's Tuoi Tre newspaper as saying.

Dollar lending rates also inched up on Monday, partly driven by importer demand, bankers said.

A mobile phone importer said his company failed to secure dollars from banks to make payments due to a government limit.

Last week the Industry and Trade Ministry announced restrictions for the remaining weeks of December on the import of goods including mobile phones, cars, cosmetics, alcohol, foodstuff and vegetables to help cut Vietnam's trade deficit.

It also asked the central bank to stop currency lending by banks for such goods.

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