Since the beginning of the year, the State Bank of Vietnam (SBV) had lowered interest rates twice, including refinancing rates, rediscounting rates, ceiling interest rates for less than six months as well as ceiling lending rates in some areas.
Within the last seven months, there had been three times lowering interest rates. The goal was to lower lending rates and support economic growth, significantly when the economy was adversely affected by the Covid-19 epidemic.
Although the interest rates had sharply reduced, the market interest rates were not subject to the ceiling, such as deposit rates for six months and above, lending rates in fields not being adjusted by the ceiling interest, was still at a high level.
Pham Xuan Hoe, deputy director of the Banking Strategy Institute (SBV), had questioned why the operating interest had decreased, all refinancing rates, rediscounting rates had declined, but the rates on the market had stayed unchanged.
This expert said that although Vietnam was in the golden opportunity to reduce interest rates, if not done well, interest rates soon would rise again.
Nguyen Tu Anh, deputy director in charge of the general Economic Department (under the Central Economic Committee) explained, the current interest rate was not falling because credit could not grow even if it were lowered. When lowering interest rates without pushing the credit, the credit could not increase, there were no reasons to lower interest rates, said a former officer of SBV.
Data from the beginning of the year to May 15 showed that the credit balance of the whole economy only increased by only 1.32%, far from the target of credit growth for the whole year from 11 percent to 14%. Compared to April, in the first half of May, outstanding loans even decreased.
Another reason pointed out by Tu Anh was that typically, the money flow had both input and output. Still, in the current period, there were gaps in customers’ debt freezing, rescheduling, and debt repayment restructuring.
That affected the cash flow, resulting in the need to raise capital to fill the gap.
According to the leader of the Central Economic Committee, at this moment, the role of SBV was incredibly essential. Thanks to the measures of SBV, interest rates on the interbank market had dropped sharply, with the one-month term interest rate was only at 1.8 percent per year. The leader felt that the rate had never been so sharply lowered like that. It was cheap, he said. This cheap source of capital helped meet the gap needs of banks, from which interest rates would gradually lower.
Besides, Tu Anh said that capital expenditure pressure would gradually force banks to lower interest rates.
Talking more about this issue, Can Van Luc, chief economist of the Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), said that when SBV reduced interest rates, the market liquidity was very aggressive. Then, BIDV itself reduced the initial interest rate. Compared to the same period last year, input interest rates had decreased by about one percent.
He added, unavoidably, there were times, commercial banks had to accept the slightly higher input interest rates, the output interest rates would fall immediately at the request of the State. At that time, according to Luc, the bank would have to think about what sources of revenue to compensate.
However, the current interest rate had dropped significantly compared to the same period last year, the economist concluded.
