The last months of the year are considered as the peak production time, so capital is a matter of concern for many businesses. However, lending interest rates are tending to increase, and credit limit (also known as credit room) of many commercial banks are increasingly tightened, all posing challenges to Da Nang businesses.

Da Nang-based businesses are worried because of the lending interest rates rise and limited credit room. IN THE PHOTO: Workers at the Pi Vina Da Nang Co., Ltd based in the Hoa Khanh Industrial Park, Lien Chieu District. Photo: M.Q

Interest rates are high, but loans are harder to get

Although it has signed a loan contract of VND 10 billion with an interest rate of 8.8% for 6 months at a commercial bank, the Le My Tran Company Limited has received announcement that the bank could not disburse capital according to the signed contract because its credit room is limited. This greatly affects the company’s business activities and other issues related to credit loans.

Similarly, Mr. Phan Phuoc Loc, Director of the Dai Phuoc Long JSC, remarked that along with high bank interest rates, this time many businesses in the city still face other difficulties such as foreign exchange rates and raw materials. Currently, some commercial banks have announced that the medium-term loan interest rates have increased to 12.8%, while the profit margin of enterprises is only 5-7%.

Although interest rates are high, loans are harder to get because commercial banks choose and review customers very carefully. With the current difficult situation in terms of both orders and rising costs, it is likely that some units will choose to ‘hibernate’ instead of producing and trading even at the time of year-end sprint.

Along with interest rates rise as well as narrowed credit room, Mr. Pham Bac Binh, Chairman of the Da Nang Association of Small and Medium-sized Enterprises, said many businesses are also worried that when a loan matures, it will be difficult to borrow again or being granted a lower limit, making it difficult to manage capital.

When a commercial bank appraises the credit file, it will be based on the production and business situation of the enterprise over the past 2 years. Meanwhile, due to the impact of COVID-19 and the volatile world situation in 2020 and 2021, revenue of many businesses was not as expected, even capital loss, so it was difficult for them to meet the loan conditions when considering the above process.

Production activities are seen at the Trung Khoa Printing Co., Ltd

Forecasting is still difficult

The State Bank of Viet Nam (SBV) has adjusted a series of operating interest rates since October 25.

In particular, for demand deposit and deposit with a term below 1 month, the interest rate ceiling is raised from 0.5% to 1% a year. The ceiling of deposit interest rates, with terms from 1 month to below 6 months, is increased by 1 percentage point to 6% a year. Meanwhile, interest rates on deposits with a term of 6 months or more will be determined by credit institutions on the basis of market capital supply and demand.

Following the central bank’s move, since late October, many commercial banks have continuously updated and increased deposit interest rates depending on terms and forms of savings. Specifically, for deposits with terms from 1 month to below 6 months, most banks have increased their deposit interest rates to a maximum of 6% per year. For deposits with terms over 6 months, some banks have increased interest rates to as high as 9-11% per year. As a rule, when banks increase deposit rates, lending interstate rates also increase.

In addition, due to limited credit room, some banks have difficulty disbursing new loans. This makes it difficult for many businesses to access loans, especially for preferential loans while they are in desperate need of capital for production and business at the end of the year.

Mr. Tran Ngoc An, Director of the Da Nang branch of the Viet Nam Bank for Agriculture and Rural Development (Agribank), informed that the aforementioned difficulties are now reported in most commercial banks. The interest rate level increases while the growth rate of capital mobilization is slow. Besides the narrow credit room, Agribank also limits new loans, and mainly focuses on taking care of existing customers to ensure compliance with the signed credit agreements. This situation is expected to continue until the end of 2022.

Mr. Vo Minh, Director of the city branch of the State Bank of Viet Nam, explained, the credit room is one of the operating tools of the State Bank of Viet Nam. The purpose of the credit room is to control and adjust the amount of credit in line with the country’s economic growth.

Right from the beginning of 2022, the Governor of the State Bank of Viet Nam has set a credit growth limit for this year of 14% for the overall banking system in Viet Nam.

In the process of operating, the national government and the State Bank of Viet Nam always pay attention to businesses. The Government has directed that the input interest rate can be increased but the output must be restrained.

Currently, commercial banks have specific policies to avoid raising interest rates too high, affecting production activities. Besides, businesses need to be flexible, creative and recalculate their capital needs.

For businesses that have signed contracts with commercial banks but their loan capital have yet to be disbursed, they can petition the leaders of the banks and the city branch of the State Bank of Viet Nam as well for handling.

Reporting by M.QUE - Translating by M.DUNG