Interbank rates have been decreasing continuously in the recent time while residential deposits have still recorded new high interest rates.
On October 14th, the average interbank interest rate in dong continued to fall by 0.02 0.09 percentage point across all terms from one month or less compared to the last session of last week. Accordingly, rates were below 1.9 percent per annum on overnight term, 2.1 percent per annum on one-week term, 2.33 percent per annum on two-week term, and 2.63 percent on one-month term. These rates are now even lower than the average US dollar deposit rate.
In the previous sessions, the dong interbank rates also recorded decline in all terms. Closing the week on October 11th, the rates were 1.93 percent per annum on overnight term, down by 0.32 percentage point compared to the last session of the week before; 2.12 percent per annum on one-week term, down by 0.38 percentage point; 2.38 percent per annum on two-week term, down by 0.3 percentage point, and 2.72 percent per annum on one-month term, down by 0.41 percentage point.
Meanwhile, on the residential market, many banks have raised deposit rates. For example, Vietnam Technological and Commercial Joint Stock Bank (Techcombank) increased the mobilisation interest rates for deposits with terms of six months, 12 months, 15 months by 0.2 0.3 percent compared to the beginning of September.
From now until the end of October 31st, at HCM City Development Commercial Joint Stock Bank (HDBank), customers depositing money on six-month term will enjoy an additional interest rate of up to one percent, reaching 7.8 percent per annum. The additional rate for 12-month and 13-month terms is 0.8 percent per annum, reaching respectively 8.1 percent and 8.2 percent per annum.
In addition, the market has also constantly witnessed new high interest rates. Theoretically, the highest deposit rate is being offered by Saigon Hanoi Commercial Joint Stock Bank (SHB) at up to nine percent (13-month term) and 8.9 percent (12-month term). However, these rates are only applied to very large personal deposits which exceed 500 billion dong.
At Viet Capital Commercial Joint Stock Bank (VietCapitalBank), for deposits from 100 million dong and more, the rates applied on terms of six months, 12 months and 15 months are respectively 8.5 percent per annum, 8.7 percent per annum and 8.9 percent per annum, within just one week on the occasion of the Vietnamese Women’s Day October 20th.
Talking about this development, Dr Bui Quang Tin from HCM City Banking University analysed that the sharp decline in interbank rates is because banks’ liquidity has been fairly abundant in the context of credit slowdown. The government bond interest rates are also at low levels. That is not to mention that the Central banks in the world are racing to lower the basic interest rates below the negative level. Thus, the State Bank of Vietnam (SBV) will also have supporting mechanisms to lower dong interest rates.
For residential market, the interest rate increase actually only took place in a few small banks. They raised deposit rates mainly to increase competitiveness and to prepare for the medium and long-term capital source to meet the Basel II and the draft of Circular 36 on the ratio of using short term funds for medium and long-term lending. This interest rate rise is only local and can hardly become a trend. Meanwhile, at Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank), Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV), Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank), Commercial Joint Stock Bank for Agriculture and Rural Development of Vietnam (Agribank), etc. which hold large market share, the deposit rates are still fairly stable at low levels.
Leader of a commercial bank said that the dong mobilisation fund of the system remains favourable with abundant short-term source. In fact, BIDV has reduced short-term deposit rates of one month and two months from 4.5 percent to 4.3 percent per annum. Meanwhile, Vietcombank still offers these rates at 4.5 percent per annum.
Moreover, from now until the end of the year, banks do not have large room for expanding credit. The business performance reports for the first six months of 2019 showed that many banks posted high credit growth rates which are close to the assigned limits in 2019. Along with the realised figure in the third quarter, the room left for the last three months of the year is limited. Therefore, banks cannot promote the deposit rate increase, and even have to slightly cut the rates to lower expenses.
