Interest rates are down, banks have excess money, why is it difficult for businesses to borrow?

On the evening of July 4, at the regular Government press conference for June 2023, Deputy Governor of the State Bank Dao Minh Tu informed the press about the issue of interest rate management and why credit growth is slower when interest rates decrease rapidly.

According to the Deputy Governor, regarding interest rate management, since the beginning of the year, the State Bank has lowered interest rates four times from 0.5 to 2% for each operating interest rate.

“Thus, last year it increased twice, each time by 1%, some operating interest rates, this year it decreased 4 times, from which commercial banks calculated that by the end of June, the mobilization interest rate had decreased from 0.7 to 0.8%, the average lending interest rate had decreased from 1 to 2%,” Mr. Tu stated.

According to Mr. Dao Minh Tu, the current lending interest rate for open market operations is only 4%; OMO lending or lending to cover temporary payment shortfalls of commercial banks - overnight lending is only 5%.

Also according to Mr. Tu, lending through the interbank market - overnight is only 0.4% to 1%, very low; lending for one week is from 0.8 to 1.5%; lending for one month is from 3 to 3.2%...

“The lending rate between banks through the interbank market is also very low. In general, interest rates are decreasing positively, including operating interest rates as well as lending interest rates,” Mr. Tu emphasized.

Finance - Banking - Interest rates decrease, banks have excess money, why is it difficult for businesses to borrow? — Deputy Governor of the State Bank Dao Minh Tu answered at the press conference.

Regarding outstanding loans according to credit management, the Deputy Governor informed that from the beginning of the year, the credit growth rate was determined to be from 14 to 15%. Statistics show that credit growth from the beginning of the year until now has only reached over 4%. Thus, there is still a lot of room for banks to make loans.

According to Mr. Tu, saying "there is no money" is not entirely true, but the cause lies in the slow credit growth rate.

Explaining the reason for slow credit growth, according to Mr. Tu, the economic situation is facing many difficulties, investment demand is declining, and consumer demand is low. When investment demand and consumer demand are low, credit demand cannot be high.

In addition, many enterprises are facing many difficulties in production and business, with large inventories and difficulties in placing orders. In addition, there are difficulties in exporting. In addition, the real estate market is not really vibrant, and many projects cannot be implemented.

Small and medium enterprises are also having difficulty accessing credit. Previously, capacity, financial ability as well as many other criteria to meet the loan requirements were very difficult, but now it is even more difficult.

Finance - Banking - Interest rates decrease, banks have excess money, why is it difficult for businesses to borrow? (Figure 2). — According to the Deputy Governor of the State Bank, many businesses want to borrow money but cannot prove their ability to repay.

Mr. Dao Minh Tu also pointed out the fact that many businesses want to borrow but cannot prove their repayment conditions. The bank's principle is that if you want to borrow, you must prove your ability to repay. There are also businesses that are offered loans but do not have a need to borrow (production, investment, and consumption needs are low).

“These are the reasons why the credit growth rate was low in the first 6 months of the year,” Mr. Tu emphasized.

According to Mr. Tu, in the coming time, the banking industry will set out requirements for better management goals and focus more on the goal of reducing interest rates to create favorable conditions for businesses.

“Recently, we have revised Circulars 39 and 06 to remove many contents as well as apply digital technology to facilitate both businesses and banks in accessing credit,” Mr. Tu stated.

Along with that, the policy of restructuring and deferring debts according to Circular 02 will continue to be implemented. This is a very direct policy to support businesses .

Source