VietNamNet Bridge – The State Bank of Vietnam (SBV) has released a document requesting to strengthen the inspection over the banks which offer the lending interest rates lower than deposit interest rates.
“I read the document and a thought about it. But I cannot understand what the central bank aims to when releasing such a decision,” the banker said.
In the past, the banks which lent at high interest rates, once fell under suspicion. And now the banks which lend at low interest rates are considered “problematic.”
SBV, in the document, stated that the lending at the interest rates lower than the deposit interest rates is the “manifestation of the unhealthy competition among banks which may generate high risks to credit institutions.”
It is true that banks have been trying every possible means to attract borrowers to fulfill the 12 percent credit growth rate plan. At some meetings, bankers denounced others of scrambling for their clients by “dumping” capital.
The banks, that “dump” capital in the market are mostly the ones with the advantages in wholesale or the ones which have low credit growth rates.
In reply, the above said deputy general director affirmed he cannot see the risks in liquidity and credit, while the low interest rates even can help clients reduce risks.
“The State Bank might worry that banks would take loss with low interest rates?” he questioned.
However, the banker said the worry is not worthwhile. “Commercial banks operate for profit; they are not the donators,” he said. “I can say for sure that banks won’t incur losses if they lend at low interest rates. The profits they make are not reflected in the interest rates.”
“Banks won’t provide loans to take loss,” he continued. “You may see that banks once paid 8-9 percent per annum to dong deposits, but they lent on the interbank market at just 2-3 percent per annum. Did they all make profit?”
When asked about the loans with low interest rates, the general director of a bank said the preferential loans will be addressed to VIP clients only. “VIP clients” are understood as the businesses which have a healthy financial situation and stable cash flow, not the big businesses or the businesses which “have relations” with banks.
The general director said when offering low interest rates, commercial banks strive to “set a sprat to catch a mackerel.” This means that in return for the low-interest rate loans, banks can get many other things: more good clients, more opportunities to provide services, which means higher turnover.
“I know some banks offer the surprisingly low interest rate at 5 percent, while the ceiling deposit interest rate is 7 percent. However, only a small percentage of clients can access bank loans at the interest rate,” he said.
Dang Bao Khanh, CEO of SeABank, affirmed that banks do not “dump” capital in the market, but they “compete healthily.”
“A bank would still feel happy if it lends at 5 percent, because it can obtain a new client who would not only borrow money from the bank, but also use other services, thus bringing higher turnover to the bank,” Khanh explained.