The basic interest rate has been slashed to 8.5% per annum, which means the highest lending interest rate is at only 12.75% per annum. However, many businesses and individuals are still complaining that they still have to pay higher interest rates for their loans, which are as high as 21% per annum in some cases.

Rising rapidly, decreasing slowly

Pham Minh Toi, Deputy Director of Hanoi-based MTA Company, related that in January 2008, the company borrowed VND 350 million from Asia Commercial Bank (ACB) for nine years. The lending interest rate at the time of contract signing was 1.55% per month, or 18.6% per annum. The interest rate was agreed to be adjusted every six months.

In July 2008, when the basic interest rate rose to 14% per annum, ACB immediately raised the lending interest rate of the contract to 1.75% per month, or 21% per annum, equal to the ceiling lending interest rate at that time. And MTA still has to pay the sky-high interest rate for the loan at this time.

In November 2008, when the basic interest rate slashed to 11% per annum, Toi borrowed VND 200 million from the same bank, at the interest rate of 1.35% per month, or 16.2% per annum. Though the basic interest rate has reduced to 8.5% per annum, Toi still has to bear the initially set interest rate.

“The bank proved to be very quick in adjusting the lending interest rate when the basic interest rate goes up, but it has been very slow in lowering lending interest rate,” Toi said.

Duong Ba Tan, Director of Tan Tien Private Business, said that he has to follow the requirements set by the bank, complaining that he now still has to pay high interest rates despite the fact that the basic interest rate has been decreasing sharply.

In January 2008, Tan Tien borrowed VND 2 billion from Y Yen branch of the Bank for Agriculture and Rural Development at the interest rate of 1.1% per month. The interest rate was later raised to 1.75% in July 2008, and has been at that level ever since.

Banks hold the handle of the knife?

Currently, most banks set their principle in the frequency of adjusting lending interest rates. Some banks have decided that the interest rates can only be adjusted every three or six months.

At Techcombank, in the first day of every quarter, the interest rates of the valid contracts are adjusted to fit the prevailing basic interest rates.

Financial experts have pointed out that the low frequency of adjusting interest rates have been bringing big disadvantages to clients, especially when the basic interest rates have been decreasing continuously within a short period.

Deputy General Director of An Binh Bank also said that most clients want the interest rates to be adjusted most regularly.

In fact, some bankers said that loyal clients and those businesses that have close business relationships with banks can still get privileges in interest rate adjustment.

Tran Van Lai, Head of the Phuong Mai Transaction Office under Techcombank, said that the interest rate adjustment is now being implemented for short-term loaning contracts of less than 12 months. Meanwhile, the bank still offers privileges to the loyal clients in medium- and long-term loaning contracts with high loans.

Source: KT & DT