In the recent time, some joint stock commercial banks has listed deposit rate of nearly 9 percent per annum instead of only about 7.2 percent-8 percent in 2017. The question is why deposit rate could be that high while inflation has been controlled at low level and mobilisation of the entire system was generally positive in the early months of the year.
Firstly, these are local high points which are associated with the internal needs and balance of those banks, not the common point that reflects the interest rates of the system. The leader of a bank which offers such high interest rate said that such deposit rate level is only applied on terms of above five years for those who really need to deposit on that very long term, and the bank has the target to mobilise long-term capital to balance its Tier-2 capital (one of the parameters to balance capital adequacy ratio). He added that after the bank mobilises the needed capital, that interest rate level will be lowered.
In contrast, for the structure of shorter term deposits, including non-term deposits, the above leader is confidence with the growth rate since the beginning of the year. He also said that the current structure of his bank has been added with the deposits of the State budget.
After decades, the activities of joint stock private banks have started to record deposits of the State budget (mainly from the State Treasury) since 2017 until now. Preliminary statistics from financial reports in recent quarters pointed out some joint stock private banks which have received this “lucky” source of capital, such as Saigon Hanoi Commercial Joint Stock Bank (SHB), Lien Viet Post Commercial Joint Stock Bank (LienVietPostBank), Military Commercial Joint Stock Bank (MB) and Vietnam Technological and Commercial Joint Stock Bank (Techcombank).
In general, the deposits of the State budget in the system of credit institutions (CIs) is a large component which has been more prominent from 2017 and continued to the first quarter (Q1) of 2018. It has two sides. Throughout 2017, the government almost monthly met and urged on the slow of public investment disbursement. The slow disbursement of public investment has limited the pervasion of value in the economy to the areas in need of capital in order to stimulate growth. In reverse, the slow public investment disbursement which is deposited in the CIs has become a support for the liquidity of the system, contributing to stabilise interest rates, but it has not spread the value of cost of capital to many members of the system.
In 2017, the scale of state budget deposits was some time updated by the National Financial Supervisory Commission (NFSC) at around 160 trillion dong. Most of those deposits are non-term and have the lowest deposit rates on the list, creating the backing for CIs.
This fact is continuing to show in the first months of 2018.
According to data of the General Statistical Office (GSO), in the Q1 2018, the realised state budget increased moderately, estimated at 48.7 trillion dong, up by 9.2 percent compared to the Q1 2017. Although the realised figure was positive and increasing, it was calculated based on a very low basis in Q1 2017. In fact, the above scale and increase have only completed 14.4 percent of the annual plan.
Report on the financial and economic situation recently released by the NFSC also stressed the need to note the disbursement progress of the capital construction investment capital (as Q1 2018 only completed 9 percent of estimates, while Q1 2017 completed 12.4 percent of estimates).
The NFSC also pointed out that the reason for the stable liquidity of the banking system in Q1 this year is partly due to the increase of foreign capital purchase by the State Bank of Vietnam (SBV) and the slow disbursement of government bond capital.
A mentioned above regarding the “blessing in disguise”, on one hand, the disbursement of public investment is slow and limited, but on the other hand it has contributed to help balance the liquidity and interest rates of the banking system.
However, it is an unwilling relationship as the more appropriate capital flows will create more direct spill over value to the areas in need of capital and spread resources to the economy to accelerate growth instead of being stagnant in banks.
There is a related fact, in which SBV has urgently withdrawn capital to neutralise the impacts in order to limit the stagnation of capital and pressures on inflation and exchange rates, etc. The SBV’s capital withdrawal also cost money, and this money is also the State budget.
