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Despite banks having announced lending interest rates of 17-19% per year, many are still trying to exceed the cap to gain extra profits.

Production enterprises can benefit from loans at 17-19% per year interest but real estate firms must pay much higher rates

Tricks to surpass interest rate caps

An anonymous official from an oil and gas production company said the lending rates for enterprises depend on their relationship with the bank.

Many banks offer a loan rate of from 17-19% in their financing dossiers but use tricks to drive up the real interest rate to 19.5-20% or more, he shared.

In addition to the credit, banks often required their clients to sign another contract in which they have to pay an additional fee for asset management based on their loans.

The additional contract is separated from the credit contract, so authorities may find it difficult to uncover full evidence to prove that the bank has surpassed the capped lending interest rates.

Many banks have pledged to decrease lending interest rates by from 1-2% per year for agriculture and production related to exports, but the real interest rates are much higher than the capped rates.

Vu Manh Hung, Chairman of Binh Phuoc Provincial Young Entrepreneurs Association, told the press that breeding farms in the province have had a lending rate of 19.5% per year imposed of them, which is still higher than the capped rates of 17-19%. This has been compounded by few enterprises able to access bank loans.

Real estate firms struggling

The country’s tightened credit policies for non-productive enterprises have seriously affected real estate firms.

Some banks have halted real estate-based lending while many other have driven up lending rates.

An anonymous director of a real estate firm in Hanoi said they have to pay interest of 30% per year.

The lack of capital has led to the stagnation of a great deal of real estate projects.

In the meantime, Dinh Thi Kim Anh, from Maritime Bank, said the bank had strictly complied with the SBV’s instruction on capped lending interest rates. It has lowered lending interest rates and attracted more clients since then.

Vu Xuan Tien, Chairman of the board of members of the VFAM Consulting Company, said the decrease in lending interest rate to from 17-19% has put many incompetent banks under pressure.

He added banks may not cut their lending rates soon, as there are no clear forecasts for the economy.