Banks agree to lower deposit interest rates, reduce loan interest rates

Interest rates decrease but capital mobilization continues to increase

Previously, on May 25, the State Bank reduced the ceiling interest rate for deposits under 6 months to 5%/year. This is the second time the operator has reduced the ceiling interest rate since the beginning of the year, in the context of stable exchange rates and signs of inflation cooling down. Accordingly, banks reduced an average of 0.5%/year for terms under 6 months, corresponding to the reduction of the State Bank. For terms of 6 months or more, the banking system reduced an average of 0.2 - 0.3%/year.

The Big 4 state-owned banks, including Vietcombank, Agribank, BIDV and VietinBank, have reduced their interest rates by 0.4% for terms of 6 months or more, bringing the highest interest rate to 6.8 - 7%/year.

Transaction at a bank in Vinh city. Photo: Thu Huyen

Ms. Le Thi Mong Ly - Deputy Director of the Bank for Investment and Development (BIDV) Nghe An branch said: Since the beginning of 2023, the State Bank has adjusted the ceiling interest rate twice from 1%/year to 0.5%/year for terms of less than 1 month and from 6.0%/year to 5.0%/year for terms of less than 6 months, ending the series of sharp interest rate increases since the end of 2022. Based on the interest rate developments in the market, in compliance with the regulations of the State Bank and according to the management of capital resources of the entire BIDV system, BIDV Nghe An has also adjusted the interest rates of almost all terms under the management of the State Bank. The reduction level of each period is from 0.2%/year to 0.4%/year for terms of 6 months or more and from 0.3%/year to 0.5%/year for terms of less than 6 months.

Thus, compared to the beginning of the year to the present, the interest rate mobilized at the branch decreased by 0.8%/year for terms under 6 months, decreased from 0.5%/year to 0.6%/year for the remaining terms. Although the interest rate mobilized decreased, thanks to promoting the reputation of BIDV brand, along with improving service quality and appropriate customer care policies, capital mobilization achieved a growth of 5%.

“However, the growth is concentrated mainly on VIP customers and foreign-invested corporate customers with terms increasing mainly 6 months and 12 months. For the residential sector, many customers have withdrawn money to invest in other channels, so there is a slight decrease. Interest rates for residential deposits range from 0.1% (no term) to 7% (12 months),” said Ms. Ly.

At Agribank Nam Nghe An branch, implementing the direction of the State Bank, the interest rate reduction will be applied from May 25. Interest rates will be reduced for terms, specifically: for individuals, 1 month to 6 months: reduced by 0.5%/year; 6 to under 12 months: reduced by 0.3%/year, 12 months: reduced by 0.4%/year, over 12 months: reduced by 0.4%/year. Currently, after applying, the mobilized capital is still increasing.

Interest rates listed at HDBank Nghe An branch on May 30. Photo: Thu Huyen

Surveys show that the listed interest rates at most private banks are currently no more than 8.5%/year. Two weeks ago, interest rates of approximately 9% were still available, but now the highest interest rate is below 8.5%/year.

At HDBank, Mr. Tran Manh Ha - Director of HDBank Nghe An branch said that recently, the bank has reduced interest rates many times, from May 31 we will apply new mobilization interest rates. Specifically, under 6 months is 5%/year; over 6 months continues to decrease by 0.4%/year, ranging from 7-8%/year depending on the term.

This is a sharp decrease in interest rates compared to February and March, when the bank applied a mobilization interest rate of 11%/year. Although interest rates have continuously fluctuated downward, thanks to well-controlled inflation and flexible management solutions, capital mobilization has been good, with a growth rate of over 30%, reaching over VND5,000 billion.

From the beginning of 2023 to May 31, 2023, the State Bank of Vietnam has adjusted interest rates twice: Interest rates on VND deposits under 6 months decreased twice, each time by 0.5% (Decision 575/QD-NHNN dated March 31, 2023; Decision 951/QD-NHNN dated May 23, 2023) and short-term lending rates for priority sectors (Decision 314/QD-NHNN dated March 14, 2023: decreased by 0.5%; Decision 576/QD-NHNN dated March 31, 2023: decreased by 0.5%).

Along with that, the State Bank also adjusted the operating interest rates in the money market twice (refinancing interest rates, rediscount interest rates, overnight lending rates in interbank electronic payments and loans to compensate for capital shortages in payments for credit institutions and foreign bank branches).

Focus on reducing lending rates

Since the beginning of the year, this is the second time the operator has reduced the ceiling interest rate on deposits, in the context of stable exchange rates and signs of inflation cooling down. This is an important step to reduce interest rates for the market. The adjustment to reduce the ceiling interest rate on deposits in VND with terms from 1 to less than 6 months aims to support banks in reducing input costs, thereby creating favorable conditions to reduce lending interest rates, increase access to capital for businesses and people, contributing to promoting economic growth.

Lower deposit interest rates are expected to reduce lending interest rates, supporting economic development. Photo: Thu Huyen

The owner of a garment enterprise shared that after the State Bank reduced the operating interest rate previously, we received a reduction in the bank's lending interest rate. The reduced interest rate helps reduce operating costs, creating conditions to reduce product prices, and the output will also be better. We also expect that lending interest rates will continue to decrease in the coming time, after the State Bank continues to lower the ceiling on mobilization interest rates.

Currently, along with the reduction in deposit interest rates, lending interest rates at some banks have also been adjusted down accordingly depending on each term. At BIDV Bank, Nghe An branch, in the first 5 months of the year, lending interest rates have been reduced 4 times; each reduction is from 0.2%/year to 1%/year, in which, the sharp reduction is mainly in medium and long-term terms. The total reduction in lending interest rates compared to the beginning of the year to date is from 1.3%/year to 2.0%/year.

“By the end of May, outstanding loans increased by 6% compared to the beginning of the year, mainly thanks to the large corporate customer segment. For new customers borrowing for production and business purposes: Current lending interest rates range from 7.5%/year to 9.6%/year for short-term loans; maximum 10.8% for medium-term loans” - Deputy Director of BIDV Nghe An branch Le Thi Mong Ly said.

Reducing lending interest rates helps increase access to capital for businesses and people. Photo: Thu Huyen

Many joint stock banks have also adjusted new lending rates lower. The leader of HDBank Nghe An branch said that after several times of reducing deposit interest rates, lending rates for some sectors such as production, business, export and import have decreased by 1-1.5%/year compared to the peak. The current credit growth rate at HDBank Nghe An branch is 5%.

However, assessing the impact of the State Bank's interest rate adjustment on the lending activities of joint stock banks, many banks said that there needs to be a delay to be able to lower lending interest rates accordingly, because the capital that banks have been mobilizing for a long time has been long-term with high interest rates, so interest rates cannot be reduced immediately.

In general, lending interest rates are gradually decreasing and state-owned commercial banks have an advantage with large scale, cheap capital without term... The issue that public opinion is currently concerned about is that in order for the reduction of operating interest rates to be effective and meaningful, creating conditions for production and business activities, there needs to be a solution to reduce lending interest rates accordingly and low-interest capital will reach businesses.