Two birds with one stone

(Baonghean) -In less than a month, Vietcombank has adjusted its deposit interest rate twice (the previous adjustment was on April 16, 2013). Vietcombank's one-month deposit interest rate since May 6, 2013 is only 6%/year, lower than the ceiling rate set by the State Bank of 1.5%/year. This move is expected to help lower lending rates, stimulate consumption, reduce inventories, free up capital sources, and better handle bad debt issues.

At Vietcombank Vinh, the VND mobilization interest rate table is as follows: 1 month is only 6%/year, 2 months is 6.5%/year and 3 months is 6.8%/year; 4-9 month terms are 7%/year, down 0.5%/year compared to the previous adjustment. This is the second time Vietcombank has proactively adjusted to reduce VND mobilization interest rates, since the State Bank imposed a ceiling on mobilization interest rates of 7.5%/year at the end of March.

Ms. Le Thi Hue Anh - Director of Vietcombank Vinh Branch said, we currently have abundant mobilized capital with 5,300 billion VND. And after days of reducing mobilization interest rates, the source of savings deposits from residents and payment deposits continues to maintain growth. As soon as mobilization interest rates decreased, Vietcombank Vinh lowered the normal short-term lending interest rate to 12%/year, medium and long-term interest rate to 13%/year (down 1% compared to the previous interest rate regulations). Preferential interest rates applied to enterprises operating in the rural agricultural sector, export enterprises and small and medium enterprises are only 11%/year for short term and 12% for medium and long term. Consumer loan interest rates also decreased to 12%, and for loans secured by valuable papers, the lending interest rate fluctuates from 8-10.5% depending on each specific subject. Currently, Vietcombank Vinh's outstanding debt is about 2,500 billion VND.

Transaction at Vietcombank Vinh Branch.

According to Ms. Hue Anh, currently, reducing lending interest rates is not only the desire of businesses but also a problem for banks when the cost of mobilizing input is still very high because for a long time, people and businesses often deposit money with long terms of 12 months or more. However, the leader of this bank believes that after the maturity of capital mobilized with high interest rates, there will be a basis to sharply cut lending interest rates to support businesses.

After Vietcombank announced the interest rate reduction, on the afternoon of May 8, the two big banks BIDV and VietinBank also simultaneously lowered their deposit interest rates. The director of BIDV Phu Quy said that at BIDV Phu Quy, the deposit interest rate for a 1-month term is 6%, for 2 months to less than 1 year is 6.5%. At VietinBank Nghe An Branch, the 1-month term is 7.5%, and for 12 months is 8%/year.

According to information from the State Bank of Vietnam, Nghe An Branch, by early May, the capital mobilization growth of the credit institution system in the province still reached 16% compared to the beginning of the year, reaching 51,200 billion VND. Meanwhile, lending continued to be difficult, outstanding debt increased only 3.5% compared to the beginning of the year, reaching 80,000 billion VND. "The pressure on resources is not high, there is still surplus capital, so in general, banks, depending on their scale, capital structure, and credit, have their own strategies to attract deposits.

Lowering deposit interest rates will stimulate economic sectors and people to consume more, thereby solving the inventory problem; at the same time, reducing deposit interest rates will help reduce deposit costs, thereby reducing lending interest rates, opening up capital sources for businesses. From another perspective, when the inventory problem is resolved, it will also help banks deal with the problem of bad debt, which is quite stressful at present." - Mr. Nguyen Xuan Diep - Head of General Department, State Bank of Vietnam, Nghe An Branch said.

Vietcombank's recent reduction in deposit interest rates is a step in anticipation of the upcoming interest rate reduction by the State Bank. Low inflation and the liquidity of the banking system has been quite good recently, many banks are facing... money surplus, so lowering interest rates is an inevitable trend. According to economic experts, with inflation still being controlled at 6 - 7%; CPI in the first 4 months of the year only increasing by 2.4% compared to the end of 2012 - the lowest increase in the past 4 years, banks cannot keep high interest rates forever and it is known that many banks will also consider adjusting interest rates for both deposits and loans.

However, according to many businesses, although deposit interest rates have decreased quite sharply in recent times, lending interest rates have decreased slowly; lending interest rates could decrease by another 1-2% compared to present if banks proactively cut costs because in reality the difference between lending interest rates and deposit interest rates is still high, about 4-5%.

Article and photos: Thu Huyen