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Banks deny lending at ‘abnormally high’ interest rates   2010-03-18 - VietNamNet/TBKTVN

Commercial banks belittle reports that they are charging upwards of 20 percent per year on loans, saying that these are rates charged by only a handful of companies that take on unsecured consumer debt.


Some sources have reported that commercial banks have pushed the interest rates on dong loans up to ‘abnormally high’ levels, as much as thirty percent per year, since the State Bank removed the cap on lending rates.  For example, the bulletin of a securities company on March 17 said that the negotiated lending interest rate has climbed to 20-30 percent per annum. However, spokesmen for a number of banks say such rates are unrepresentative. 


A credit officer of Saigon-Hanoi Bank (SHB) told Thoi bao Kinh te Vietnam that high interest rates are now being applied mainly to consumer loans. He said that 20 percent is ‘relatively high’, while 30 percent is just ‘a particular phenomenon’ – loans taken only by people who expect a high return in the near future.


At SHB, for example, the lending interest rate for medium and long term loans is 15-16 percent per annum on average. The rate is quoted to clients who borrow money to expand their production and business. Meanwhile, the higher rate of 16-18 percent per annum is being quoted for consumer loans, i.e., clients who borrow money to make personal purchases or invest.


“For many businesses, even a 16-17 percent loan would be unacceptable. If they have to borrow at 20 percent, what kind of business could count on earning a profit,” the credit officer asked.  In fact, he said, banks try to avoid lending at high interest rates. In principle, high interest rates mean high risks, and in many cases, lending at high interest rates does not mean earning high profits.


A director of a branch of SeABank in HCM City also confirmed that his bank is lending at 15-17 percent per annum on average.  Higher rates are quoted only in special cases.  When asked who would quote a 30 percent interest rate on loans, he said that this may be by financial companies lending for purchase of products such as electronic appliances, computers or motorbikes.


According to the SeABank director, the highest lending interest rate ordinarily seen in the market now is the 20-22 percent per annum rate charged against credit card debt. The interest charged on automobile loans is also relatively high, followed by other types of unsecured consumer loans.  If a client is willing to mortgage assets, he can secure a more favorable rate, e.g., to purchase or repair a house.


The SeABank director cautioned that there can be a big difference in the cost of loans calculated based on the original amount of the loan and others based on the remaining balance.  A representative of HSBC Vietnam said the same, stressing that the second way of calculating interest is the best and fairest to customers.

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