Hanoi (VNA)🐭 – Many enterprises said that they are facing capital shortages due to too high interest rates and difficult borrowing conditions, and called for the rates to be further reduced and debt repayment deadlines extended more, heard a seminar held by Tuoi tre (Youth) newspaper on March 30.

Enterprises hope for more interest rate cuts

Le Mai Huu Lam, General Director of the Cat Van Loi Industrial Electrical Equipment JSC, said that bank interest rates have stayed very high recently while well-performing manufacturers can earn only about 6 - 7% in net profit at the maximum. He expressed his hope that banks will lower interest rates and ease borrowing conditions. He suggested that aside from providing loans based on workshops and factories used as collateral, credit institutions should consider businesses’ 50-year land leasing contracts in industrial parks as collateral for loans. Nguyen Ngoc Hoa, Chairman of the Ho Chi Minh City Union of Business Associations (HUBA), noted a recent HUBA survey has shown declines in the key export and manufacturing industries, which led to record low growth rates. The growth slowdown in the textile - garment sector, the export contraction of the fishery and wood sectors, and the stagnation in the real estate market have also resulted in idleness in steel and cement production along with business activities. Enterprises have been struggling to sustain operations amid falling demand, so their borrowing demand is not for production and business activities but for survival. Hoa noted banks should extend debt repayment deadlines for enterprises, who need capital for long-term investment. However, with an interest rate of over 10%, they do not dare to borrow. He held that more intensive policies for long-term capital are needed, and interest rates should be slashed to under 10% to encourage companies to borrow. In addition, banks should also ease conditions on collateral as many enterprises have land but are unable to use it as collateral due to prolonged legal procedures.

Interest rates to be cut further

In response to businesses’ proposals, Deputy Governor of the State Bank of Vietnam (SBV) Dao Minh Tu said the interest rate policy is the most difficult in macro-economic governance as it needs to concurrently boost economic growth, ensure interests of investors and enterprises, and be suitable for many sectors. Tu said in spite of ongoing interest rate hikes in many countries, the SBV still advocates rate cuts to support people and enterprises. It will continue encouraging commercial banks to further reduce interest rates in the coming time. The extension of debt repayment deadlines for enterprises is also necessary and will continue in the time ahead. However, it depends on sectors so as to prevent non-performing loans that may affect the safety of the banking system. In the next one - two weeks, the SBV will launch a credit package worth 120 trillion VND (over 5 billion USD) with preferential interest rates for social housing development and old apartment block renovation. This package will be carried out soon to help enterprises and home buyers, the official added./.