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Deposit interest rates beginning to come down
Previously, banks rushed to raise deposit interest rates in order to improve their liquidity in the short term. Now, as their liquidity has improved and they need to ensure long-term safety in operation, they will likely lower interest rates.
The State Bank has said that the 17% per annum interest rate is the most reasonable. It allows banks to mobilise capital from the public and ensures profit for them.
Under the Law on Credit Organisations, the lending interest rate must not be higher than 150% of the basic interest rate announced by the State Bank of Vietnam, which means that the ceiling lending interest rate is 14% per annum now.
Gia Dinh Bank is now offering the interest rates of 18.62%/annum for 2-month term and 18.90% per annum for 3-month term deposits. Meanwhile, the previously applied rate was 19.5% for 2-3 month term deposits, which meant the sharp decrease of approximately 1%.
Prior to that, Kien Long Bank removed the 20% per annum interest rate just after 1-2 days of application. The bank made the move after the State Bank threatened to discipline it if it did not make suitable adjustments. Kien Long Bank’s interest rates are no higher than 19% per annum.
Commercial banks’ reports show that the prevailing deposit interest rates state-owned banks are offering are 17-18% per annum, while the rates offered by joint stock banks are 18-18.5%. Very few banks have interest rates of over 19%. The 19% interest rate is considered the ‘sensitive’ threshold, and is being applied by only a few banks like Ocean Bank and Kien Long.
Nguyen Manh, Head of the Capital Source Division under the Bank for Investment and Development of Vietnam (BIDV), said that in order to maintain normal operations, banks need to have a margin between deposit and lending interest rates of 3% at least. Therefore, overly high deposit interest rates and the ceiling lending interest rate of 21% will make banks suffer.
Meanwhile, Ho Huu Hanh, Director of the HCM City Branch of the State Bank of Vietnam, believes that the margin should be 4%, which means that the deposit interest rate should be 17% at maximum.
In the latest news, BIDV has announced it has cut lending interest rates as of July 9 by 0.2% per annum on average.
The 0.6% interest rate decrease will be applied for priority clients, including the government’s key projects, petrol importers, cement, electricity and steel producers. Key construction projects which need to be completed in 2008-2009 will receive priority for loans.
The bank has also announced it will cut interest rates on loans in foreign currencies by 2%. The maximum lending interest rate of 8.8% will be applied for clients who borrow money to import input materials for local production (ingot steel, fertiliser, petroleum, chemical substances, equipment, cloth). The maximum lending interest rate of 9.8% will be applied to clients who borrow to import other kinds of products.
VNN
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