The Bank for Investment and Development of Viet Nam announced yesterday that it would reduce its yearly interest rate from 8.5 to 6.5% for some of its borrowers in a bid to shepherd them through difficulties.

The Ha Noi-based bank is the first to reduce its rate in 2009.

The 6.5% is even lower than the State Bank of Viet Nam’s prime rate of 8.5%.

But the lower rate is only applicable to existing contracts between the bank and importers of steel ingot, fertiliser, cement and essential medicines forced to dip heavily into their stocks because of financial constrains.

BIDV deputy general director Doan Tien Dung revealed that the importers owed about VND2 trillion (US$114.28 million) in outstanding loans.

The bank expected to recover VND2 trillion within the next three months via the lower rate effective from tomorrow, he said.

The bank would also lower its three-month rate from 10 to 8.5% from tomorrow for export contracts and exporters who pledge to sell hard currencies to it.

The rate to small-and-medium sized enterprises, enterprises that employ more than 1,000 workers and manufacturers of consumer goods would be 9 per cent. That for six-month loans would be 9.5-10% and 10-10.5% for those with longer terms.

The rate for medium-to-long-term loans would be the same as that for 12-month deposits plus at least a yearly 3% per year. But it would not exceed 1.5 times the prime rate.

The deputy general director said the bank was committed to the adjustment of its interest charges in accord with the Government’s directive intended to spark the economy.

The rate for short-term US dollar loans would range from a yearly 4.8% to 5.7%. The cost for long-term loans would be the same as for 12 – month US-dollar deposits plus at least a yearly 3 per cent.

All contracts signed before the reduction would be reviewed and adjusted. The BIDV will announce its new deposit interest rates tomorrow.

Lower rates?

Speculation that the State Bank of Viet Nam will further lower its prime rate to 7-7.5% from 8.5% has intensified.

Although some bankers agree with Viet Nam News that a 7.5% prime rate is possible, most anticipate a reduction of only about 0.5% of a percentage point.

“An 8 per cent prime rate is quite reasonable for now,” said a State-owned bank official who asked for anonymity. “Any more could make it difficult for the banks to manage their capital flows.”

Several banks report their lending has stalled because – after having had to pay rather high interest rates to mobilise capital – they now have to reduce their interest charges in line with the lower prime rate.

The lending rate is expected to stay at a yearly 6-7.5% for the foresecable future. (VNS)