Although commercial banks are bracing for another prime rate cut expected in a few days’ time, they see the likely move as highly discouraging and unwelcome as the slashed rate would put lenders under tenterhooks, bankers said on Tuesday.

Nguyen Duc Vinh, general director of Technological and Commercial Bank of Viet Nam (Techcombank), said that the trend of interest rates further falling would be unavoidable, but cutting the rates alone to stimulate demand will not be enough at this time.

“The more important driving force should be the fiscal policy and other methods to stimulate consumption and promote manufacturing to rev up the economy up. Lower rates are needed but not enough,” he said.

As the gap between borrowing and lending rates is being narrowed, banks now have to walk a tight rope to make a profit in the coming time, Vinh said, adding that rates had come back to the reasonable level and if it is too low, banks would find it hard to mobilize capital.

Banks will also face more risks if the ceiling lending rate is lowered further, he said.

With the ceiling lending rate capped at 12.75% per year now, Techcombank and other banks have refrained from making consumer loans.

“We are waiting for the Government’s permission to bring out negotiated rates for some special credit products including consumer loans because with the current rates, the net margin is not enough to offset risks,” he said.

Nguyen Hung Manh, CEO of An Binh Commercial Bank, said that no bank wanted to face the volatile interest rates, recalling the hard situation for banks last year when all had to stay on the run to revise interest rates on and off. He also admitted that banks would face more difficulties if the prime rate was cut.

An Binh Bank have slashed its borrowing rates to low levels so if another prime rate cut is announced before Tet, the bank will wait and see other lenders’ moves before lowering its interest rates, said Manh.

Meanwhile, general director of Saigon Thuong Tin Commercial Bank (Sacombank) Tran Xuan Huy said that there were only a few days before Tet so even if the base rate is cut before Tet, Sacombank will keep its interest rates unchanged until after the holiday.

According to the central bank, interest rates and lending rates at commercial banks have fallen by 20 to 100 basis points last week. Borrowing rates at State-owned banks are now from 6.99% to 7.58% per year for terms of less than 12 months while the rates offered by private banks are in a narrow range of between 7.78% and 7.84% per year. Some small private banks now still offer interest rates higher than 8% for terms under 12 months.

With the volatility on interest rates last year, credit operations generated very small profits for lenders and some that heavily rely on credit operations even incurred losses. (SGT)