No increase in lending interest rates on the occasion of Tet

(Baonghean) - At the end of the year, capital demand usually increases, and thus deposit and lending interest rates also increase. However, at the end of 2016, lending interest rates did not increase. This is a different development compared to previous years, showing abundant liquidity, and banks proactively source capital to meet the production needs of the market.

Seize credit growth

Cutting costs and reducing lending interest rates are ways for banks to compete to attract customers at the end of the year, because most joint stock banks tend to increase deposit interest rates, although not high. At the Joint Stock Commercial Bank for Investment and Development, Nghe An branch, in the first days of the 2017 calendar year, capital mobilization was relatively stable, in which terms of less than 6 months still accounted for a large proportion (more than 53% of total capital mobilization). BIDV is continuing to implement the promotional savings program "Loving Tet - Full Spring" with thousands of attractive gifts, thus attracting a large number of customers to participate, so the source of mobilization from the population still achieved good growth.

Ms. Le Thi Mong Ly - Deputy Director of BIDV Nghe An branch said: Outstanding loans of retail customers increased due to increased demand for loans for production and business, especially during the time to serve the needs of Lunar New Year. However, outstanding loans of enterprises decreased slightly because at the end of the lunar year, the amount of payment from enterprises was high, enterprises withdrew money from payment accounts to pay off bank loans.

Customers transact at the headquarters of the Industrial and Commercial Bank, Nghe An branch.

In the context of competition, banks will not increase lending interest rates, despite pressure to mobilize capital. For Vietinbank Vinh City Branch, by December 31, 2016, capital reached 3,235 billion VND, an increase of 375 billion VND (equivalent to 13% compared to 2015), reaching 92% of the plan. Outstanding loans reached more than 3,224 billion VND, an increase of 822 billion VND, equivalent to 34% compared to 2015.

Ms. Tran Thi Chau - Deputy Head of General Department of Vietinbank Vinh City Branch said: At the end of the year, the demand for capital for production, business and consumption all increased, the lending interest rate remained stable, without any fluctuations. The branch always has preferential credit programs for new customers, good customers with many interest rates, terms suitable to the business characteristics of each enterprise. In parallel with credit activities, the bank also provides products such as guarantees, capital supply commitments, trade finance, international payments... to meet the maximum needs of customers participating in bidding, construction works, domestic and foreign payments.

In order to meet the capital needs for production and business to serve the market during the peak season at the end of the year as well as the increasing demand for personal consumption capital, many banks have launched many preferential interest rate credit packages, with the aim of unblocking the credit flow, creating a source of cheap capital for customers. This is also an opportunity for banks to increase credit balance growth during the big business season of the year.

Stable loan interest rate

At banks in Nghe An, deposit interest rates have even decreased. However, the reduction in deposit interest rates only occurs at a few strong banks with potential and large market share.

Ms. Nguyen Thi Thu Thu - Director of the State Bank of Vietnam, Nghe An branch, said: Recently, the interest rate situation in the area has been relatively stable; VND lending interest rates have been gradually adjusted down by banks. State-owned commercial banks have reduced short-term lending interest rates in VND by 0.5%/year and adjusted medium and long-term lending interest rates down to a maximum of 10%/year for good customers borrowing capital for production and business. Some banks have implemented lending programs with preferential interest rates from 6%/year for short-term loans for consumption, production and business. The common interest rate for deposits with terms under 6 months is 4.5 - 5.4%/year; for terms from 6 months to under 12 months is about 5.4 - 6.5%/year; for terms over 12 months is about 6.4 - 7.2%/year. The common lending interest rate is around 6-9%/year for short term and 9-11%/year for medium and long term. For good customers with healthy and transparent financial situation, the lending interest rate is from 5-6%/year.

However, lending interest rates have not decreased as much as businesses expected. Mr. Tran Dac Dung - Director of Nghe An Gas Company Limited said: "We are transacting with Vietinbank, Vinh City branch. At the end of the year, capital demand increases, so interest rates usually increase, but currently they are still maintained at 7-8%/year as in the year. That level is acceptable for our business."

Mobilization interest rates and deposit interest rates are guaranteed. However, many businesses are not really satisfied as expected. Illustrative photo

Despite accelerating capital supply, banks cannot further reduce interest rates because the profit margin is already very low, only about 3-4%. According to the Director of the State Bank of Vietnam, Nghe An branch, in previous years, at the end of the year, they often increased deposit interest rates to attract capital, but this year, due to excess liquidity in the system, some large commercial banks have moved to reduce deposit interest rates. Therefore, maintaining stability and not letting interest rates increase is a great effort, and it is difficult to expect further reductions. This is the basis for credit institutions to maintain low lending rates, creating favorable conditions for enterprises to produce and do business. And the good news is that the growth of outstanding loans at the end of the year is very good.

The average lending interest rate has decreased by 1-2% compared to the same period last year, creating conditions for businesses to borrow capital at lower interest rates, stimulating production. In the coming time, the State Bank will continue to determine the target of directing and implementing effectively the key tasks and solutions under the direction of the Government, the Governor of the State Bank and the Provincial People's Committee; linking the growth of banking activities with the goals and tasks of socio-economic development of the province; striving to achieve a growth rate of capital sources and outstanding loans of about 15-20%, bad debt below 3% of total outstanding loans.

“We will focus on balancing the terms between mobilized capital and lending; focusing on lending capital to agriculture and rural areas according to Decree 55/2015/ND-CP; lending to exports, small and medium enterprises, key projects of the province; lending to poor households and other policy beneficiaries in accordance with the law” - the leader of the State Bank of Vietnam, Nghe An branch affirmed.

Viet Phuong