Vietnam urges banks to slash loan rates to help revive economy

"Banks who want to keep their clients should quickly cut their lending rates," the Vietnam Economic Times quoted State Bank of Vietnam Governor Nguyen Van Binh as telling business people in Danang on Thursday.

The Vietnam Economic Times, in a report on its web site (vneconomy.vn), said the governor told his audience that deposit rates - which are regulated by the state - could be cut by at most 1 percentage point this year. Binh said it was therefore in their interest to reduce lending rates.

"Otherwise, if they wait until the markets recover before bringing rates down, their market share will definitely shrink," the governor said.

In Vietnam, short-term deposit rates at 8 percent. Loan rates range from 9 percent to around 16 percent, and state media have quoted company executives as saying they can pay as much as 18 percent interest.

High loan rates have squeezed many of the country's small and medium-sized businesses, nearly 100,000 of which have had to cease operations in the past two years.

Many investors and economists see high loan rates and major problems of bad debts at banks as root cause of an economic slowdown. The economy last year grew 5.03 percent, the lowest since 1999, and the government has projected 5.5 percent growth this year.

The government

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