Banks struggle to entice borrowers despite slashing interest rates

As of Dec. 13 banks’ credit for the year had grown by 9.87% as against a target of 14.5% for the full year. Thanh Tung, a credit officer at a top 10 bank, said: "Finding customers who are both financially healthy and need loans at this time is not easy."

"Many businesses really want to borrow but do not meet collateral and risk management norms, while those that meet them are cautious about borrowing," he added.

Unlike their usual scramble for deposits at the year-end, this time many banks have slashed deposit interest rates and instead offer preferential treatment for borrowers.

HDBank is waiving loan interest for the first month to attract retail and corporate borrowers. For the latter, the rate after the first month is 6.7% or more.

To attract small and medium-sized enterprises, VPBank is disbursing loans through credit cards it is issuing with a limit of VND10 billion (US$416,000).

Business owners can take advantage of the 45 days of interest-free credit or convert the loans into equated monthly installments with an interest rate of 1-1.2%.

Interest rates have also been slashed on mortgages. Shinhan Bank is offering them at 5.99% for the first six months, and BVBank at 5.5%.

"We are happy to just break even," a banker said.

Despite all these efforts, it is difficult for credit to grow strongly due to weak demand and the wait-and-see attitude of potential borrowers who are hoping lending interest rates will decrease further, according to bankers.

Trinh Bang Vu, director of retail lending at Shinhan Bank, said: "At year-end, our bank recorded an improvement in credit compared to previous months. But overall, it is lower than expected."

Interest rates have fallen on new loans but remain above 10% for existing ones, according to securities companies.

They expected interest rates to fall further in 2024.

Vietcombank Securities Company said the rates could decline by 1-1.5 percentage points next year when banks would consider lowering them for businesses with good prospects to restructure debt and help them at a difficult time.

According to MB Securities Company, credit growth will be 13-14% in 2024.