Lending rates will remain stable

Four major banks have unexpectedly lowered their deposit interest rates by 0.3-0.5%. Many businesses expect that following the move by these major banks, many smaller banks will follow suit and lower their deposit interest rates to reduce lending rates at the end of the year.

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However, according to economic experts, the reduction in deposit interest rates is not enough to reduce lending interest rates. However, when the demand for loans increases at the end of the year, the fact that lending interest rates are kept stable is also a positive signal for businesses.

Difficult to reduce interest rates across the board

Economist - Dr. Bui Quang Tin, Banking University of Ho Chi Minh City, said that although the four major banks, BIDV, Vietcombank, Vietinbank and Agribank, have just reduced deposit interest rates last week, this is only a temporary action because the major banks' interest rate reductions are all in the short-term range.

For small banks, the move to reduce interest rates following large banks is unlikely to happen, because currently, most of the business activities of small banks are still weaker than large banks. In addition, small banks are also under pressure from the fact that from January 1, 2017, the limit on the ratio of short-term capital for medium and long-term loans according to Circular 06/2016 will be reduced from 60% to 50%. According to Dr. Tin, to prepare for this roadmap, banks are forced to increase capital mobilization for all terms, not just short-term, to continue lending medium and long-term.

In addition, the regulation on the ratio of outstanding loans to total deposits of commercial banks according to Circular 36/2014 must reach 80%. If they want to increase outstanding loans without changing this ratio, commercial banks must increase the capital mobilization ratio to maintain outstanding loans to total deposits at 80%. "Therefore, small banks are currently waiting to see what happens and have not dared to make any move on whether to further reduce deposit interest rates or not, and it is unlikely that there will be a simultaneous reduction in deposit interest rates in the near future," Dr. Tin commented.

Interest rate reduction in priority areas

Dr. Tin also said that lending under Resolution 35 of the Government is being implemented very well by banks. Therefore, although they have to compete in lending to achieve the year-end credit growth plan, banks will sacrifice some profits in some business areas to keep interest rates stable for businesses borrowing under Resolution 35, or only increase or decrease interest rates slightly if there are fluctuations in the lending market.

Discussing this issue, some bank leaders affirmed that the current medium and long-term lending interest rates have decreased significantly compared to the same period last year. Notably, the short-term interest rates have also been adjusted down sharply by the bank. The evidence is that since the beginning of the year, not only Sacombank but many banks have implemented many VND loan packages for all businesses, with priority given to small and medium-sized enterprises. As for short-term capital financing activities for import enterprises, the bank is also lending at an interest rate of no more than 6.5%.

Although interest rates have not been adjusted down, many banks are still maintaining preferential credit packages to facilitate the removal of difficulties for businesses. Most recently, Agribank has allocated VND15,000 billion with preferential interest rates for priority sectors, good customers, and those with traditional credit relationships with the bank. This bank is also proactively calculating to maintain appropriate lending interest rates from now until the end of the year for customers; ensuring a balance of sufficient capital to meet the reasonable borrowing needs of businesses and all classes of people, especially in the fields of agriculture, rural areas, and farmers.

Another financial expert also analyzed that the short-term lending interest rate in VND applied by banks at no more than 7%/year for 5 priority sectors and industries is having a good effect. Accordingly, banks can widely apply low interest rates to some other sectors and industries with development potential.

Hai Yen - Minh Phuong/baotintuc