Deposit interest rate ceiling may be lifted soon

The fact that 15 banks have reduced deposit interest rates, although the interest rate ceiling remains at 7.5% according to the National Financial Supervisory Commission, is a signal that the State Bank should soon remove this administrative measure.

The ability to self-adjust interest rates without intervention from the State Bank is one of the most positive points of the monetary market, as pointed out by the National Financial Supervisory Commission in its May economic report.

The National Financial Supervisory Commission believes that it is necessary to consider removing the ceiling on deposit interest rates. Photo: Anh Quan.

Although the ceiling interest rate remains at 7.5%,deposit interest rateMany banks have adjusted down. Before the State Bankinterest rate cutrefinancing, discount rate on May 10, state-owned banks have been rushing to bring deposit interest rates down to 5-6% per year with terms of less than 12 months. First is the Bank for Foreign Trade of Vietnam (Vietcombank), then the Bank for Investment and Development of Vietnam (BIDV), then the Vietnam Bank for Industry and Trade (Vietinbank) and the Bank for Agriculture and Rural Development (Agribank). By May 21, according to calculations by the National Financial Supervisory Commission, 15 joint stock banks had reduced interest rates for all terms.

The ceiling on deposit interest rates was introduced in 2011 to "tighten" the interest rate level. At that time, banks competed to mobilize deposits with high interest rates to attract deposits when liquidity was problematic. As a result, a large amount of capital that they mobilized at expensive prices was lent out to the economy by these banks at high interest rates, causing difficulties for businesses.

Up to now, after more than a year of having a "ceiling", many opinions say that it is time to remove this measure so that the market can decide for itself instead of administrative measures. However, answering the press on May 10, the State Bank itself still maintains its stance of continuing to maintain the mobilization ceiling. Ms. Nguyen Thi Hong - Director of the Monetary Policy Department said: "The monetary market was established as it was in the past, so removing the ceiling may make it even more difficult."

According to a representative of the State Bank, although the system's liquidity has improved and there is surplus, there are still credit institutions whose liquidity is "not really good". "If the ceiling is removed now, these banks may increase deposit interest rates again and lead to high lending interest rates. Thus, the policy of reducing lending interest rates cannot be implemented", Ms. Hong explained.

However, the National Financial Supervisory Commission still recommends that the State Bank should study the appropriate time to remove the ceiling on deposit interest rates to help the market increase its self-regulating ability.

Deputy Director of the Banking Science Research Institute - Banking Academy - Nguyen Duc Trung said that in some countries like the US, the ceiling on deposit interest rates is used when they want to reduce the number of banks. "When there is a ceiling, small banks will gradually lose the opportunity to do business and become difficult, forcing them to merge with large banks. The US used this method in the 1980s to reduce the number of small banks," said Mr. Trung. In the case of Vietnam, a country that Mr. Trung said also has too many banks, this method can also be an option.

According to VNExpress - TH