Interest rates have fallen sharply like never before.

While Vietcombank lowered deposit interest rates to 6% per year, many other banks simultaneously reduced lending interest rates.

Vietcombank takes the lead in reducing deposit interest rates (source: baohaiquan.vn)

Vietcombank takes the lead in reducing deposit interest rates.

Last weekend, the market was abuzz with the news that Vietcombank unexpectedly lowered its deposit interest rate to 6% per year, an unprecedented sharp reduction for this period. This is the second consecutive time this bank has taken the lead in interest rate cuts, even though the State Bank of Vietnam has not yet taken any action to lower the ceiling on deposit interest rates.

Specifically, according to the recently adjusted interest rate schedule, the ceiling interest rate for VND deposits is 6%/year for 1-month terms, 6.5%/year for 2-month terms, and 6.8%/year for 3-month terms. For terms of 6-9 months, the applicable deposit interest rate ceiling is 7%/year, a decrease of 0.5%/year compared to the previous adjustment.

The largest adjustment this time, at 1% per year, applies to terms of 12 months or more, with a ceiling interest rate of 8% per year. Meanwhile, according to the State Bank of Vietnam's regulations, banks are free to negotiate interest rates with customers for deposits with terms exceeding 12 months without applying the 7.5% per year ceiling.

With two consecutive adjustments in less than a month (the previous adjustment was on April 16, 2013), Vietcombank's lowest deposit interest rate since May 6, 2013, is only 6% per year, 1.5% lower than the State Bank of Vietnam's record-breaking ceiling.

To date, Vietcombank remains the only bank to have reduced deposit interest rates. Other banks continue to attract deposits from the public at a common interest rate of 7.5% per year for terms under 12 months. For terms over 12 months, Bac A Bank is leading with an interest rate of 11% per year. For this term, other banks apply rates ranging from 9% to 10% per year.

Although only Vietcombank has announced a reduction in interest rates so far, many believe that a widespread interest rate cut may be imminent.

Recently, in its April 2013 macroeconomic report published by the National Financial Supervisory Commission, the agency stated that bank interest rates may be further reduced by approximately 2-3% in the near future, due to inflation being controlled at a low level and credit growth not yet reaching 1.5%.

Another factor is the stable and relatively well-maintained liquidity of the banking system, with lending interest rates in the open market remaining relatively low, mainly concentrated on overnight and one-week maturities with common interest rates ranging from 3-5%.

If interest rates fall by a maximum of 3% as predicted by the National Financial Supervisory Commission, they could even drop to 4.5% per year. Therefore, Vietcombank's 6% per year interest rate may not yet be the "bottom".

Massive reductions in lending interest rates.

The reduction in deposit interest rates to 6% per year has enabled Vietcombank to significantly lower lending interest rates, making it one of the banks with the lowest deposit and lending interest rates in the market today.

Vietcombank has also continued to significantly reduce lending interest rates, with the standard short-term lending rate now at only around 10.5% per year, and the lowest medium- and long-term lending rate for businesses at only around 11.6% per year.

Vietcombank also stated that it is currently implementing short-term preferential credit programs with limits of up to VND 30,000 billion and USD 700 million, with the lowest lending interest rates of 7.5%/year and 2%/year respectively, to support businesses during the current difficult period.

Meanwhile, although deposit interest rates have not yet been reduced, many banks have aggressively launched various programs to lower lending interest rates in order to boost credit growth.

At the end of April, the Vietnam Investment and Development Bank (BIDV) launched a Business Loan program with fast disbursement and competitive interest rates, offering many attractive incentives from now until July 10, 2013, for individual and household business customers borrowing from BIDV.

Accordingly, BIDV offers customers loans at an attractive interest rate of 9% per year for the first three months for loans disbursed during the program's validity period.

In addition, customers borrowing for production and business purposes will immediately receive a 20% discount on BIC – Binh An insurance premiums from BIDV Insurance Corporation (BIC). The loan amount for this program is substantial, reaching 7,000 billion VND.

In addition, BIDV also applies an interest rate of 10% per year for customers borrowing to buy a house.

From December 10, 2012, Ocean Commercial Joint Stock Bank (OceanBank) launched a short-term VND loan product with an ultra-low interest rate of only 6.8% per year, lower than the deposit interest rate. However, only businesses operating in permitted sectors, prioritizing those needing capital to meet the funding needs of certain sectors and industries that require encouragement according to the direction and regulations of the Government and the State Bank of Vietnam, are eligible to access this funding.

An Binh Commercial Joint Stock Bank (ABBANK) is launching a VND 500 billion support package with a preferential interest rate of 9.9% per year. This is ABBANK's most attractive preferential package to date for individual customers. This VND 500 billion preferential credit package for individual customers will be implemented for four of ABBANK's loan products: Loans for purchasing/building/renovating houses and land; Loans for purchasing cars; Secured consumer loans; and Loans for production and business.

Sacombank (Saigon Thuong Tin Commercial Joint Stock Bank) also has a credit package of up to VND 4,200 billion with preferential loans for individual customers in 2013 at an interest rate of only 9% per year. The loan target group for this credit package is relatively broad, ranging from loans for rural development, buying, building, and renovating real estate to loans for employees, production and business activities, and consumption.

Many other banks also offer loan programs with preferential interest rates.

According to (vov.vn) - LT