VietNamNet Bridge – Bank loan interest rates decreased sharply in 2014, but are expected to rise in 2015.

Commercial banks slashed the deposit interest rates on the last days of 2014, which made businesses think that the lending interest rates would continue to fall in 2015.

Vietcombank eased deposit interest rates five times in 2014. The latest adjustment was made on December 22, 2014 with the 12-month term deposit interest rate down by another 0.2 percent to 6 percent per annum, much lower than the 10.5 percent set earlier this year.

The move by Vietcombank was followed by many other commercial banks, both small and big. This was encouraged by the State Bank of Vietnam, which wants businesses to be able to more easily access bank loans.

A report from the State Bank showed that the average input capital mobilization cost decreased by 1.5 percent, while the lending rate decreased by 2 percent.

The current average lending interest rates are 9-10.5 percent for short-term loans and 11-12.5 percent for long-term loans.

The report also showed that only 10.65 percent of the bank loans bear an interest rate of over 13 percent, lower than the 19.72 percent at the beginning of the year.

Dr Phan Minh Ngoc from Sumitomo Singapore noted that the current interest rates are “reasonable” because interest rates have decreased along with the inflation decrease.

However, they have been told not to estimate the capital cost at low levels when drawing up their 2015 business plans.

An interest rate rise is very likely to happen in 2015 on the stronger recovery of the economy.

The Governor of the State Bank, Nguyen Van Binh, admitted at a banking conference in early 2015 that it would be a difficult task for the banking sector to maintain 2014’s interest rates because of pressure from the economic recovery. High economic targets would lead to higher capital demand.

Meanwhile, Do Thien Anh Tuan, lecturer at the Fulbright Economics Teaching Program, said the central bank still can slash interest rates further, but it is not highly possible that the interest rate will go down.

Ngoc of Sumitomo also thinks the expected interest rate will increase if the targeted inflation rate in 2015 is higher than 2014.

However, he believes that the interest rate increase will be seen in the second half of 2015. In the first half of the year, the State Bank will follow a loosened monetary policy to satisfy capital demand for a high GDP growth rate, and then it would tighten policy to control inflation.

Kim Chi