The State Bank of Vietnam (SBV) required credit institutions to maintain a reasonable and stable deposit interest rate level; consistent with the ability to balance capital and to expand healthy credit; complying with regulations on deposit interest rates and enhancing credit control in risk areas.
Recently, some banks have adjusted to raise deposit rates. For example, Saigon Hanoi Commercial Joint Stock Bank (SHB) applied the highest savings interest rate to 8.2 percent per year, while at Vietnam Public Joint-stock Commercial Bank (PVcomBank), the highest interest rate is 8.5 percent per year. In Tien Phong Commercial Joint Stock Bank (TPBank), the highest interest rate is 8.6 percent. Facing this move of banks, many opinions expressed concern that it would affect lending interest rates in the near future.
However, as observed by reporters, the move to raise deposit rates is only local, mainly in small banks with the purpose of retaining market share and customers. Moreover, interest rates rise mainly in the long term; not to mention the banks also included conditions on the new deposits to enjoy this interest rate. For example, to enjoy the interest rate of 8.5 percent and 8.6 percent per year at PVcomBank and TPBank, customers must have a minimum deposit of 500 billion dong. With the above conditions, very few people can meet it.
Further analysis, a banking expert said that some small banks raised interest rates for long-term deposits to restructure capital sources to meet the regulations on the ratio of short-term capital for medium and long-term loans. Indeed, under the provisions of Circular 19/2017/ TT-NHNN amending and supplementing a number of articles of Circular No. 36/2014/ TT-NHNN, starting from January 1, 2019, banks must reduce their ratio of short-term capital used for medium and long-term loans from 45 percent to 40 percent.
Even this ratio may fall lower in the near future as SBV is developing a roadmap to reduce the ratio of short-term capital for medium and long-term loans to 30 percent. “This forces banks to promote long-term capital mobilisation to ensure the requirements of SBV,” the expert said.
However, because interest rates only increased in long terms and also mainly increased by small banks with relatively small market share. While banks occupy the largest market share of capital mobilisation in the economy, state-owned commercial banks do not raise deposit rates. Therefore, the move to increase deposit rates of small banks does not have much impact on the common rate level.
Talking to reporters, a bank leader said that the reason banks boosted medium and long-term mobilisation through raising interest rates to serve business needs in the coming months, especially at the end of the year when the capital demand is often higher.
In fact, the mobilising interest rate of the banking system is still quite stable. According to the report of the week’s performance from August 26 to 30, 2019, the VND mobilising interest rates were popular at 4.5-5.5 percent per year for deposits from one to less than six months; 5.5-6.8 percent per year for deposits with a term of six months to less than 12 months; 6.6-7.5 percent per year for tenors of from 12 months.
Due to stable deposit rates, lending rates are also expected to be stable in the near future. This prediction is further supported by the fact that when operating monetary policy, SBV always aims to maintain the liquidity of the system at a reasonable level to create conditions for credit institutions to increase credit and maintain a stable interest rate level.
Even in mid-July, SBV for the first time reduced interest rate of seven-day bills by 0.25 percent from 3 percent to 2.75 percent. According to the assessment of Bao Viet Securities Company (BVSC), the seven-day treasury bill rate of SBV has the characteristics of a “floor interest rate”, which is the reference for interbank interest rates. Abundant system liquidity combined with SBV’s move to reduce rates pushed interbank rates down sharply.
In fact, lending rates have remained stable in the context that deposit rates have increased. Even lending rates are further adjusted by the state-own commercial banks by another 0.5 percent for priority areas. Currently, VND lending interest rate is popular at six to nine percent per year for short term; 9.0-11 percent per year for the medium and long term.
Can Van LucChief Economist of Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) also assessed that, basically, the lending interest rate in the near future would remain stable due to the general policy of the government and SBV, even though this made the input and output gap- NIM of the banking system decrease.
“The government and SBV direct banks to maintain stability or reduce interest rates for priority areas, short-term loans with a number of specific customers, but not be able to conduct mass. If mass reduction, the banks do not have enough resources. Because banks are also a business, so they have to take care of shareholders and employees. Not to mention the NIM of banks is quite low compared to other regional countries. Therefore, if there is a reduction in interest rates, banks can only reduce for businesses in the priority areas”, Luc said.
While a bank leader also said, from now until the end of the year, the bank would maintain a stable interest rate level. “Currently, large state-owned commercial banks have reduced lending rates for priority areas so banks are not foolish to raise lending rates to lose customers. In order to offset the interest from the reduced credit, the bank continues to reduce operating costs further and more diversely as well as add utilities for modern banking services”, he shared.
Regarding this issue, Standing deputy Governor Dao Minh Tu also affirmed, continued to operate active and flexible monetary policies in order to stabilise macro-economy, control inflation, stabilise exchange and lending interest rates, contributing to a stable business environment for people and businesses. Specifically, SBV requires credit institutions to maintain a reasonable and stable deposit interest rate level; consistent with the ability to balance capital and to expand healthy credit; complying with regulations on deposit interest rates, enhancing credit control in risk areas.
“By this time, SBV can ensure the policy management objectives set from the beginning of the year. Especially with stable interest rates, there is no increase in interest rates from now until the end of the year. Even for priority areas, policy beneficiaries can reduce interest rates,” deputy Governor Dao Minh Tu emphasized.
