The hottest topic of discussion last week was “black credit” at commercial banks, referring to banks providing loans at interest rates higher than quoted rates and ceiling rates as stipulated by SBV.

Under current regulations, the lending interest rate must not exceed 12 percent per annum. However, businesses complain they must borrow money at 15 or 16 percent, or 3-4 percent higher than the ceiling rate.

In fact, banks quote lending interest rates at 12 percent, but they collect additional fees, making the actual loan costs much higher than quoted rates.

This has been called a “dual price” scheme: the official quoted price and the actual price.

Businesses say that, in general, the capital cost in 2010 is triple that of 2009. The short-term, four percent interest rate subsidy program has ended, while the basic interest rate has been raised from seven to eight percent. This means that the ceiling lending interest rate has increased from 10.5 to 12 percent.

Kiem argued that commercial banks are “blocking” business by creating big difficulties and that all SME member companies are “groaning” under the weight of overly high interest rates.

Kiem also revealed that banks loan money at high interest rates because they pay too much to depositors. SBV ordered banks to limit deposit interest rates to 10.5 percent. In efforts to scramble capital, however, banks have been trying to raise the interest rate.

“They (banks) can collect some small additional fees, however, 3-4 percent would be serious,” Kiem told VnExpress on January 22.

Commercial banks maintain high incomes even during national economic difficulties, while they also try to charge businesses high fees.

Some financial experts have pointed out that the currently applied ceiling interest rate is the main reason that banks must “dodge the laws” through additional fees.

National Assembly Economics Committee Deputy Chair Vu Viet Ngoan commented that the ceiling interest rate “distorts” the market and does not truly reflect the capital supply and demand.

Kiem personally advocates the removal of the basic interest rate and ceiling interest rate. He believes that interest rate liberalization without full national economic recovery will push enterprises against the wall.

Source: VietNamNet/VNE