According to the announcement of the State Bank of Vietnam (SBV) in the afternoon of May 12, since 13/5/2020, a series of interest rates such as deposit rates, the open market operation (OMO) interest, lending rates, re-lending rates discount, and so on, had been reduced by 0.5 percentage points compared to the previous one.
Specifically, the refinancing interest rate decreased from five percent per year to 4.5 percent per year. The rediscount interest rate fell from 3.5 percent per year to three percent per year. The overnight lending interest rate in inter-bank electronic payment and lending to compensate for the capital shortage in the clearing of SBV with banks declined from six percent per year to 5.5 percent per year. The offering interest rate of valuable papers through OMO (OMO interest rate) had decreased from 3.5 percent per year to three percent per year.
The ceiling interest rate for deposits from one to less than six months decreased from 4.75 percent per year to 4.25 percent per year while the ceiling interest rate for demand deposits from less than one month decreased from 0.5 percent to 0,2 percent per year.
The maximum short-term lending interest rate in dong for borrowers to meet the capital needs to serve some priority economic sectors and industries (five priority areas) decreased from 5.5 percent per year to five percent per year.
Regarding deposit interest rates, the survey on the market showed that, before the decision to lower interest rates from May 13, the lowest interest rate for less than six-month term deposits belonged to the group of four largest banks of the system and Vietnam Technological and Commercial Joint-Stock Bank (Techcombank). Accordingly, the interest at these banks maintained at 4.1 percent to 4.3 percent per year, while the remaining banks’ interest rates were from 4.5 percent to 4.75 percent per year, of which small banks listed the rate reaching the ceiling. Because SBV imposed the ceiling interest rate, the difference was almost negligible for short-term deposits.
However, for long-term deposits of six months or more, due to the SBV’s floating demand, each bank had a large difference in interest rates. In which, state-owned commercial banks had the highest interest rate of 6.8 percent to seven percent per year. In contrast, the number at the highest group of private banks was over eight percent per year, even more than nine percent per year for large deposits of enterprises. For example, Saigon Hanoi Commercial Joint Stock Bank (SHB) announced to pay 9.2 percent when there was 500 billion dong deposited over one year.
Due to the impact of the Covid-19 epidemic, some suggested that SBV should apply the cap on long-term deposit rates to lower the medium and long-term lending rates. However, the majority of experts believed that such a ceiling was not necessary, even that could significantly affect the liquidity of the system when small banks were mostly using interest to compete with major banks in attracting deposits.
Moreover, lowering interest rates to support customers affected by the disease was also done well by banks to cut costs and cut profits. Compared to the old lending interest rate level before the disease outbreak, the banks then offered new loans with interest rates lower than 0.5 percent to four percent per year.
