BanksFinance - Banking - Money

Banks To Issue More Loans Despite Lower Rates

Source: Vientiane Times

Despite the fact that the Bank of the Lao PDR (BOL) recently declared a lower interest rate for deposits and loans, many banks in Laos believe the number of depositors and borrowers will not decrease in the years to come.

ACLEDA Bank Lao Ltd. is one of several banks that have expressed confidence that the lower interest rate will not cause a decrease in customers because client numbers have in fact been increasing since the central bank announced the change in rates last August.

“Our bank has been issuing loans of US$7 million to US$8 million to 2,000 customers a month since the announcement of lower rates for deposits and loans by the BOL in August. We also looked at issuing loans of US$10 million a month this year,” an official said.

This year, the bank also expects to issue loans valued at US$135 million to 58,000 families, which will be calculated in Lao currency.

Meanwhile a senior official at Phongsavanh Bank, who asked not be named, said that any negative impacts on the number of depositors as a result of the lower interest rate could not be made public.

However, the staffer noted that the benefits for customers who had been issued a loan were certainly abundant because they could repay at the lower rate.

“When every bank has to give customers the same rate for deposits and loans, there is no reason for customers to leave us for another bank,” he added.

According to a report by a BOL official at the recent 10th ordinary session of the National Assembly’s Seventh Legislature, the interest rate was lowered from 5 percent to 4.5 percent in August.

The report stated that since the lower interest rate was announced, the number of deposits made and loans issued by commercial banks had dropped over a short period of time.

Lao currency deposits attracted interest rates averaging 10 percent per annum at the end of 2014, which fell to an average of 7.7 percent per annum in November 2015.

Meanwhile the repayments for short term loans fell from 12.7 percent to 10.5 percent while long term loans saw repayments fall from an average of 13.3 percent to 11.8 percent.

State-owned banks offered the lowest rates at 11 percent per year, the report said. At the same time, interest rates for foreign currency loans fell from 9.6 percent per annum to 8 percent per annum.

In addition, long term loans fell from 10.5 percent per year to 9.7 percent per year while deposits remained the same at 5 percent.

Commercial banks are continuing to accrue more capital with funds rising by 4.1 percent per month. Loans issued in Lao currency have increased by 1.6 percent per month.

To ensure the announcement takes effect, BOL is continuing to inspect the operations of commercial banks to ensure the adjustment of deposit and loan rates is properly carried out and regulations are complied with.