With the latest basic interest rate slash, the basic interest rate has been cut by 4% within 45 days, to 10%, which means that the ceiling interest rate has been lowered from 21% to 15%. The compulsory reserve ratio for deposits has also been lowered from 11% to 6% in order to help commercial banks access more usable capital.

However, the interest rate cuts have not helped increase the disbursement of loans. The demand for capital from businesses has been decreasing, as a result of the global economic recession, while banks do not dare to take risks to increase loaning for fear of risks.

Nguyen Quang A, a senior economist said that businesses only want to borrow money when they can make a profit with the money. Meanwhile, businesses cannot make a profit nowadays, in the context of major difficulties all over the world.

Deputy General Director of a joint-stock bank also said that high interest rates are not the problem for businesses any more. The bigger problem is the decreasing demand, which has forced them to narrow production.

A said that cutting interest rates proves to not be the only solution to help enterprises maintain production, while suggesting reconsidering tax policies.

“The Government should consider lowering import tax, so as to make the prices of input materials lower, or delay tax collection for a certain time. This should be seen as capital which can be pumped directly into businesses to help stimulate production,” A said.

Dr Tran Hoang Ngan, Deputy Headmaster of the HCM City Economics University, said that of the five measures to prevent economic recession drawn up by the Government, only the measure on monetary policies has been implemented, while the other four measures have not seen any progress.

Ngan said that echelons and sectors have been slow in implementing the instructions by the Prime Minister.

In fact, the basic interest rate cuts have not been applauded, as bankers said that this will prevent them from providing consumer credit.

General Director of East Asia Bank, Tran Phuong Binh, said that with the current ceiling interest rate of 15%, no bank dares provide consumer credit as the low interest rate cannot offset risks.

Ly Xuan Hai, General Director of Asia Commercial Bank (ACB), sharing the same view, added that in other countries, there always exists a big gap between normal credit and consumer credit.

Bankers have urged the central bank to resume the negotiation-based interest rate scheme, in order to allow banks to be more flexible in providing consumer credit.

While emphasizing that prevention from economic recession should be put as a top priority task, experts also warned the measures to stimulate investments may bring high inflation back to the national economy if they cannot be implemented in an effective way.

Source: TBKTSG