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Depositors upset, borrowers uninterested over rate cuts
With Vietcombank cutting its deposit interest rate by 1 percentage point as of May 6, depositors are unhappy and concerned over where to send their money, while borrowers seem uninterested, as it remains to be seen whether or not lending rates will go down accordingly.
The country's fourth-largest lender by assets is now offering a 6 and 7 percent a year interest rate for savings of a term between one and nine months, instead of the 7.5 percent a year capped by the State Bank of Vietnam in late March.
Analysts said Vietcombank’s rate cut signaled that a lower interest rate ceiling will be released by the central bank in the near future, while depositors are shocked by the news.
“Saving money in a bank at the moment is not attractive at all,” said Hue, a depositor in Hanoi.
However, Hue will still keep her money at the bank because she has yet to find any alternative investment channel, she added.
Similarly, while admitting that the 6 percent a year interest rate is too low, Mai Nhung, a depositor based in Ho Chi Minh City, said she also sees other channels as too risky.
“I’m financially unable to join the stock market, while the gold market has proved unstable in the recent past,” she told Tuoi Tre.
Further cuts on lending rates
Lowering the deposit interest rate is an inevitable move at a time when most banks have a surplus in mobilized capital while lending has slumped, according to banking expert Nguyen Tri Hieu.
The banking system booked a modest 1.4 percent loan growth in the first four months of the year, while deposits jumped 5.34 percent, Hieu said, citing data from the SBV.
“Banks have to slash deposit interest rates to create conditions for lowering the lending rate to boost credit growth,” he elaborated.
“Moreover, inflation in January – April was restricted to only 2.41 percent, so banks cannot maintain the high lending rates,” he added.
Cao Si Kiem, a member of the National Consultant Committee for Monetary Policy, said the lowered deposit rates will enable lending rates to be further cut by 1 to 2 percentage points.
The current gap between deposit and lending interest rates is 4 – 5 percentage points, while it should be 3 – 3.5 percentage points, Kiem said.
Nguyen Ngoc Bao, deputy chairman of the Viet Duc Group, said businesses can only operate with a gain if lending rates are pulled down to 9 – 10 percent a year.
“Deposit interest rates have repeatedly been cut while lending rates remain around 10 to 15 percent a year, which burdens businesses,” he said.
The current total outstanding loans in Vietnam are worth some VND3,000 trillion, according to the National Financial Supervisory Commission.
“If lending rates are cut by 2 percentage points, lending interest will fall by hundreds of trillions of dong a year, which will positively impact the economy,” said the commission’s chairman, Vu Viet Ngoan.
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