Dr Le Xuan Nghia, vice chairman of the National Finance Supervision Committee, said the banking sector achieved only 3.9 per cent in credit growth for the first four months of the year compared to late 2009.

During those four months, credit in Vietnamese dong grew only 0.9 per cent.

One of the main reasons for such stunted growth were high interest rates on loans for companies, according to many experts.

Since January, the interest rate for long – and medium-term loans at state-run commercial banks has been 14-15 per cent per annum, while the rate at commercial joint-stock banks, 15-17 per cent, sometimes even 18-20 per cent.

To provide enterprises with access to cheaper capital sources from local banks, the Government recently asked the State Bank of Viet Nam to cut interest rates.

Since mid-April, some commercial banks have cut rates on two occasions, with the lending rate now at 13 per cent.

Cao Sy Kiem, a member of the National Monetary and Financial Advisory Council, said such rates would allow for faster credit growth at banks.

A deputy director of a major commercial joint-stock bank in HCM City said more loan applications had been received.

This was a good sign for the economy, Kiem said.

He, however, said the central bank as well as commercial banks need to closely manage credit activities to ensure the quality of credit growth.

Source: Vietnam News