Banks’ deposit interest rates have been continuously decreasing since mid-March.
Previously, the State Bank of Vietnam (SBV) simultaneously adjusted operating rates and interest rate cap with the aim to reduce input costs, facilitating banks to lower interest rate level.
At the same time, the authority also called banks to lower lending interests for customers which are affected by the Covid-19 pandemic. Thus, the deposit rates of banks have been falling since mid-March. In fact, the trend of interest rate reduction will continue due to the difficulty of increasing credit. The Covid-19 outbreak has disrupted business operations of many areas.
This disruption has caused credit to slow down, recording a growth rate of 1.3 percent in the end of the first quarter of 2020, the lowest in the past six years.
In addition, due to banks’ concerns about the increase in bad debts, they have become more cautious with new loans. Many forecasts said that the credit growth in 2020 will be only about 11%, lower than the 13.6 percent in 2019.
Another indicator also supports interest rates to fall, that is inflation. The General Statistical Office (GSO) has announced the decrease of 1.54 percent in April Consumer Price Index (CPI) compared to the previous month. This is the lowest level in the period of 2016 2020 due to the sharp all of gasoline prices.
The results of a survey on business trends of credit institutions (CIs) in the second quarter of 2020 by the Department of Forecasting and Statistics (under the SBV) showed that the number of CIs expecting interest rates to decrease in the near future was more than the number of CIs expecting interest rates to increase.
The number of CIs that expected the mobilisation lending interest rate level to go down in the next quarter and in the whole 2020 nearly doubled compared to the previous survey.
According to CIs, the liquidity of the banking system was in a good status at the end of the first quarter for both local and foreign currencies, more abundant than the last quarter of 2019 due to the low credit growth, while the capital deposited in the banking system increased higher.
Based on customers’ needs (in both savings and borrowings), the mobilisation of the entire CI system is expected to increase by an average of four percent in the second quarter of 2020 and 11.5 percent in 2020, down by 1.7 percent compared to the expected number in the survey period in December 2019.
Notably, on the interbank market, in the sessions from April 27th to 29th, the dong interest rates slightly fluctuated across all terms.
Closing the session on April 29th, the dong interest rates were around 2.18 percent per annum on overnight term (up by 0.1 percent per annum), 2.32 percent per annum on one-week term (down by 0.06 percent per annum), 2.4 percent per annum on two-week term (down by 0.1 percent per annum), and 2.62 percent per annum on one-month term (down by 0.18 percent per annum).
On the Open Market Operation (OMO), in the three sessions from April 27th to 29th, the SBV continued to offer three trillion dong per session on mortgage channel with a term of seven days and offer interest rate of 3.5 percent per annum. There was no winner recorded. In the week, only one billion dong matured on May 1st. Thus, the circulation value on this channel fell to one billion dong.
The SBV did not offer bills last week. In the week, 10 trillion dong of bills matured during the holidays.
The number of treasury bills in circulation decreased to nearly 122 trillion dong. Thus, the SBV net injected 9.999 trillion dong to the market via OMO channel last week.
