HANOI – Governor Nguyen Van Binh of the State Bank of Vietnam has reiterated now is not the right time to lower lending rates, so enterprises should look at other funding sources instead of solely depending on bank loans.
“We often rush to the bank whenever we’re in need of money,” he replied to an enterprise’s question about whether interest rates would be lowered at an online meeting on banks and financing sources held by the Government’s web portal on Thursday.
He advised businesses to pause and look back at themselves. If they were financially sound, they would remain unaffected by an interest rate of as high as 25%, he noted.
He said Vietnamese businesses totally depended on banks, whereas in the world, the upfront capital of a new startup normally accounts for one-third of total capital and the other two-thirds is borrowed from financial institutions and friends.
Governor Binh said that if an enterprise’s equity made up two-thirds of its capital and the remaining one-third came from banks, it could manage three to four financing cycles a year with an annual interest rate of a staggering 25%.
In reality, 80-90% of capital of local firms is sourced from banks, he said, so they would have difficulty securing loans when credit was tightened.
Binh asked enterprises to restructure their production to cope with the reality of the economy in the coming time.
He said banks could not lower lending rates as long as their liquidity problem remained unsolved. Most banks borrow short-term capital from their customers but use this source to make medium- and long-term loans, thus putting their liquidity at risk, he noted.
