There are high hopes among the business community that commercial banks will lower interest rates in the near future.

The government’s tight monetary policy which aimed to curb inflation last year, however, led to a sharp decrease in cash and credit transfers.

Despite the declining rate of inflation from July to late 2011, great pressure continued to bear upon businesses as they had to struggle with high production costs.

According to the Ministry of Planning and Investment (MoPI), by September 2011, nearly 49,000 businesses had either suspended operations without further ado on tax payment or declared themselves bankrupt.

In more than one year of facing high interest rates, businesses had to make do with the difficult situation by carefully considering their financial and business plans with a focus on highly competitive products to make a quick return on investment in the domestic market.

To help businesses through hard times, the government has adopted a tax relief policy. Many domestic businesses are expecting declining interest rates on bank loans so that they can boost production and create more jobs for workers.

From late 2011 to early 2012, a continuous fall in the inflation index made it possible for banks to lower their interest rates sooner or later.

Regarding the 2012 roadmap for lowering interest rates, the Governor of the State Bank of Vietnam (SBV), Nguyen Van Binh, says there are certain advantages in lowering interest rates this year when the monthly consumer price index (CPI) has gradually dropped to below 1 percent as from last August, showing a positive sign of inflation being under control.

Lowering interest rates should go along with other efforts to help ensure banks’ liquidity and rein in inflation, Mr Binh notes.

Over the past ten years, the Vietnamese banking system has developed strongly with its annual credit growth rate rising from 29.4 percent to 33 percent in 2010.

However, some credit organizations have used up to 60-70 percent of their capital to fix medium and long-term interest rates on mobilized loans, even exceeding the SBV regulated level of 30 percent. Consequently, after the SBV moved to control inflation, many banks have found themselves in a fix to ensure liquidity.

As the problem of liquidity cannot be solved overnight, it is no easy task to lower interest rates.

Sharing his view with the SBV Governor, Dr Le Xuan Nghia, Vice Chairman of the National Committee for Financial Supervision, says the rate of inflation has dropped sharply as from last July to a 10- year record low during the lunar New Year Festival (Tet).

However, a lot of work needs to be done as banks are not out of the woods yet to maintain liquidity. Therefore, the business community’s hopes for short-term interest rates to decline are still far from coming true, Nghia says.