Deposit rates increased by 0.5 percent in the first half of 2019. Along with regulations related to the ratio of short-term capital for medium and long-term loan, long-term deposit interest rate remains high in the near future.
According to the State Bank of Vietnam (SBV), credit growth as of the end of June was 7.33 percent compared to the beginning of the year. This was the lowest increase in the last four years (2018 increased by 7.82 percent; 2017 increased by 9.01 percent; 2016 increased by 8.21 percent).
In the recent report, Bao Viet Securities Joint Stock Company (BVSC) believed that the low credit growth in the last two quarters came from four main reasons. Firstly, the orientation of reducing the ratio of short-term capital for medium and long-term loan of SBV was about 40 percent, making some commercial banks unable to meet the above rate difficult to expand medium and long-term loan.
Secondly, the orientation of credit control was stricter for non-priority sectors such as real estate and consumption.
Thirdly, banks implementing Basel II standards would have to consider the risks of loans to ensure the capital adequacy ratio (CAR).
Fourthly, many banks were granted credit growth limit not too high in the first six months.
In terms of structure, credit is heavily accrued to the processing and manufacturing industriesthe driving force of economic growth. At the same time, credit for agriculture and rural areas received many priorities due to the influence of African swine flu. As of the end of Q2/2019, loan outstanding of the livestock sector reached 51 trillion dong, of which 1.2 trillion dong was affected by the disease.
In terms of interest rate, in contrast to the interbank interest rate situation, long-term deposit rate (over 12 months) at commercial banks remained high, even increasing slightly in Q2/2019. Compared to the end of 2018, deposit rate increased by about 0.5 percent.
According to the latest draft, SBV intended to gradually reduce that ratio to 30 percent in two to three years. BVSC believed that the orientation would force commercial banks to continue restructuring their sources towards maintaining high and medium-term deposit rate.
Because the input interest rate does not decrease, the lending interest rate level in non-priority sectors such as real estate and consumption will be unlikely to fall in the near future. If interest rate is reduced, this will only be a direction, for priority areas and through a group of state-owned joint stock commercial banks.
Deposit rate increased by 0.5 percent in the first half of 2019. BVSC believed that the regulations related to the ratio of short-term capital for medium and long-term loans would continue to keep the deposit rate for long terms (over 12 months) remain high.
