A multi-purpose arrow
In less than a month, Vietcombank has adjusted its deposit interest rates downwards twice (the previous adjustment was on April 16, 2013). From May 6, 2013, Vietcombank's one-month deposit interest rate was only 6% per annum, 1.5% lower than the ceiling set by the State Bank of Vietnam. This move is expected to help lower lending interest rates, stimulate consumption, reduce inventory, and unlock capital flows, thus better addressing the issue of bad debts.
(Baonghean)In less than a month, Vietcombank has adjusted its deposit interest rates downwards twice (the previous adjustment was on April 16, 2013). From May 6, 2013, Vietcombank's one-month deposit interest rate was only 6% per annum, 1.5% lower than the ceiling set by the State Bank of Vietnam. This move is expected to help lower lending interest rates, stimulate consumption, reduce inventory, and unlock capital flows, thus better addressing the issue of bad debts.
At Vietcombank Vinh, the VND deposit interest rates are as follows: 1 month at only 6%/year, 2 months at 6.5%/year, and 3 months at 6.8%/year; terms of 4-9 months are 7%/year, a decrease of 0.5%/year compared to the previous adjustment. This is the second time Vietcombank has proactively adjusted down VND deposit interest rates since the State Bank of Vietnam imposed a ceiling of 7.5%/year at the end of March.
Ms. Le Thi Hue Anh, Director of Vietcombank Vinh Branch, stated that they currently have abundant mobilized capital of 5,300 billion VND. Following the recent reduction in deposit interest rates, savings deposits from individuals and current account deposits continue to grow. Immediately after the reduction in deposit interest rates, Vietcombank Vinh lowered its regular short-term lending interest rate to 12% per year, and medium- and long-term interest rates to 13% per year (a 1% reduction compared to previous rates). Preferential interest rates for businesses operating in the agricultural and rural sectors, export businesses, and small and medium-sized enterprises are now only 11% per year for short-term loans and 12% for medium- and long-term loans. Consumer loan interest rates have also decreased to 12%, while loans secured by securities have interest rates ranging from 8-10.5% depending on the specific borrower. Currently, Vietcombank Vinh's outstanding loan balance is approximately 2,500 billion VND.
Transactions conducted at Vietcombank Vinh Branch.
According to Ms. Hue Anh, lowering lending interest rates is not only a desire of businesses but also a challenge for banks, as the cost of funding remains very high due to the fact that for a long time, individuals and businesses have often deposited money for long terms of 12 months or more. However, the bank's leader believes that after the maturity of high-interest mobilized funds, there will be grounds to significantly reduce lending interest rates to support businesses.
Following Vietcombank's announcement of interest rate cuts, on the afternoon of May 8th, the two major banks, BIDV and VietinBank, also simultaneously lowered their deposit interest rates. The director of BIDV Phu Quy branch stated that the interest rate for a 1-month term is now 6%, and for terms from 2 months to less than 1 year it is 6.5%. At VietinBank's Nghe An branch, the interest rate for a 1-month term is 7.5%, and for a 12-month term it is 8% per year.
According to information from the State Bank of Vietnam's Nghe An branch, as of early May, the growth in capital mobilization of the system of credit institutions in the province still reached 16% compared to the beginning of the year, reaching VND 51,200 billion. Meanwhile, lending continued to be difficult, with outstanding loans increasing by only 3.5% compared to the beginning of the year, reaching VND 80,000 billion. "The pressure on funding is not high, and there is still surplus capital, so generally, banks, depending on their scale and capital structure, have their own strategies in attracting deposits."
Lowering deposit interest rates stimulates increased consumption by economic sectors and the public, thereby addressing the inventory problem; at the same time, lower deposit interest rates reduce funding costs, allowing banks to lower lending rates and unlock capital for businesses. From another perspective, resolving the inventory issue will also help banks address the currently challenging problem of bad debts,” said Mr. Nguyen Xuan Diep, Head of the General Affairs Department of the State Bank of Vietnam, Nghe An Branch.
Vietcombank's recent reduction in deposit interest rates is a preemptive step in anticipation of the upcoming interest rate cut by the State Bank of Vietnam. Low inflation and relatively good liquidity in the banking system, coupled with many banks facing excess cash reserves, make lowering interest rates an inevitable trend. According to economic experts, with inflation indicators still under control at 6-7%; and the CPI for the first four months of the year increasing by only 2.4% compared to the end of 2012 – the lowest increase in the last four years – banks cannot maintain high interest rates indefinitely, and it is understood that many banks will soon consider adjusting both deposit and lending interest rates.
However, according to many businesses, although deposit interest rates have decreased quite sharply recently, lending interest rates have decreased more slowly; lending interest rates could decrease by another 1-2% compared to the current level if banks proactively cut costs, because in reality, the difference between lending and deposit interest rates remains high, at around 4-5%.
Text and photos: Thu Huyen
