Interest rate race still not 'cooling down'

Relieve capital pressure for businesses

Recently, the State Bank has increased the credit target for 2022 by 1.5% - 2% for the entire system, equivalent to an additional VND 240,000 billion for the economy in the remaining time of the year. This is considered a move to manage monetary policy to relieve the borrowing pressure of the business community, meeting the supply of goods for the end of the year.

Along with the decision to loosen the credit room, the State Bank has affirmed the message of only pouring capital into priority sectors. Regarding real estate, the State Bank only encourages banks to pour capital into social housing projects and housing serving real needs. The State Bank is also ready to support liquidity with longer terms, even after Tet, so that credit institutions can feel secure when lending towards the common goal of controlling inflation and supporting sustainable economic growth.

Currently, state-owned commercial banks Vietcombank, Vietinbank, BIDV, Agribank have stable interest rates, lower than the market. Photo: Thu Huyen

Mr. Doan Quang Le - Deputy Director of Trung Do Joint Stock Company shared that in 2022, the company's revenue will reach 800 billion VND, an increase of 10% compared to last year. Currently, we are borrowing 300 billion VND, although access to banks is favorable and interest rates are stable. In December, we borrowed 2% higher than the beginning of the year but 1% lower than in November and such an increase is acceptable. The decision of the State Bank at this time is very timely to support businesses. We hope that with the increased credit source, we will reduce the pressure on financial difficulties for the increasing capital demand at this time.

Implementing the Prime Minister's direction on providing capital for the economy and reducing interest rates, the Banking Association recently held a meeting with all commercial banks to agree on solutions to support production and business enterprises and stabilize the interest rate increase. In the context that many commercial banks have raised their mobilization interest rates to 11%/year to ensure capital mobilization, the Banking Association has called on credit institutions to agree on a maximum mobilization interest rate of 9.5%/year for all terms, including promotional bonuses when depositing savings, thereby reducing the lending interest rate, striving to reduce from 0.5 - 2%/year.

The demand for capital for production and business is increasing at this time. In the photo: High-quality material production line of Trung Do Joint Stock Company in Nghi Van commune, Nghi Loc. Photo: Nguyen Hai

Talking to us, a representative of the State Bank of Nghe An branch said: During the year, there were 2 times of implementing the State Bank's directive documents on interest rates. On September 29, 2022, the State Bank adjusted the operating interest rate up by 1%/year, increased the maximum deposit interest rate in VND at credit institutions by 0.3 - 1%; on October 24, 2022, the State Bank adjusted the operating interest rate up by 1%/year, increased the maximum deposit interest rate in VND at credit institutions by 1%, increased the maximum short-term lending interest rate by 1% to meet capital needs for a number of economic sectors and industries.

Deposit interest rates continue the race

Although the Banking Association has met to discuss solutions to reduce deposit interest rates, thereby reducing lending interest rates to support businesses in developing production and business, interest rates continue to increase, even increasing every day. At VIB Bank, Vinh branch, on December 15, the 6-month deposit interest rate was 10.5%/year, and on December 16, it increased to 10.7%/year for deposits over 1 billion VND with gifts.

Currently, the common interest rate for terms over 6 months at joint stock commercial banks has been pushed above 10%/year, even above 11%/year such as HD bank, SHB,... and there are promotional levels for large value deposits. Mobilization interest rates are establishing a new level, which according to many banks is to attract capital to ensure year-end capital needs, pay bonuses, or advance money for raw materials in time for orders early next year.

Deposit interest rates have increased and are continuing to increase, especially at joint stock commercial banks. Photo: Thu Huyen

Mr. Nguyen Manh Ha - Director of HD Bank said: In fact, the growth rate of mobilization does not meet the demand for loans. The demand for capital for production and business at the end of the year and in anticipation of next year is very high, so banks are stepping up mobilization. This is a step to create a source for lending at the beginning of the year. HD Bank is focusing on mobilizing capital even though in 2022, the growth in mobilization will be up to 30%; outstanding loan growth is 20%.

Commercial enterprises have high demand at the end of the year to prepare goods for year-end consumption demand, but for manufacturing enterprises, the beginning of the year is the beginning of the production cycle. Therefore, this is the time when banks are in the capital attraction season. And the interest rate level for mobilization and lending in the market has 2 segments, with the 4 "big" state-owned commercial banks: Vietcombank, Agribank, Vietinbank, BIDV, the interest rate for mobilization and lending is stable, lower than the market. At these banks, enterprises borrow short-term working capital at 9%/year; long-term investment loans at 11%/year.

Meanwhile, joint stock commercial banks have high interest rates for deposits and loans. For example, at VIB, the current interest rate for business loans is 13%/year, and for consumer loans is 16%/year.

Many businesses complain that interest rates are too high; but because they need capital to maintain production and business and complete projects, they still have to accept loans. "In addition to loosening credit room, banks must reduce interest rates, otherwise businesses will not dare to borrow, unless they have really positive business plans" - a business shared.

According to the State Bank of Vietnam, Nghe An branch, as of December 31, 2022, the capital mobilized in the area (excluding development banks) is estimated at VND 194,767 billion, an increase of VND 19,301 billion compared to the beginning of the year, equal to 11%, higher than the same period in 2021 (9.6%). The total outstanding debt of credit institutions in the area is estimated at VND 259,953 billion, an increase of VND 31,121 billion compared to the beginning of the year, equal to 13.6% (the growth rate in 2021 is 9.4%). Of which, medium and long-term outstanding debt is estimated to account for 41.5%.

Currently, the Government and the State Bank have continuously issued directives on capital supply for the economy, reducing interest rates, and are ready to support liquidity with longer terms, even after Tet, so that credit institutions can feel secure when lending and supporting businesses in production and business. To support the economy, many banks have committed to reducing lending interest rates; it is expected that there will be a widespread interest rate reduction in the near future./.