Creating a new rate for mobilizing interest

The mobilizing interest rates are adjusted in bulk

Previously, the increase of mobilizing interest rates was common in small joint stock banks when their capital and market share were far lower than that of state-owned commercial units. In recent times, big banks have also joined in the race to "attract" capital.

The survey of mobilizing interest rates at some banks showed that all four major state banks have adjusted to raise the rates. At BIDV, some mobilizing interest terms have been adjusted up about 0.2%. While in September, 1-month and 2-month terms increased by 0.2%, from 4.1%/year to 4.3%/year, now this interest rate is up to 4.5%/year. Six-month deposits in September were revised up from 5.1% to 5.3% and now they reach 5.5%/year.

At Agribank, the 1-month and 2-month rates increased from 4.3% to 4.5%/year. For 6-month term, the mobilizing interest rates increase from 5.3% to 5.5% and 12-month is 6.8%. The 18- and 24-month terms of this bank are 6.8%.

Meanwhile, at VietinBank, the interest rate for 1- to 2-month term is currently at 4.5%. For 3-month term, the interest rate is 4.8% and the 6-month term is 5.5%. The 12-month term of VietinBank is currently listed at 6.8%, 24-month is 6.6%, At Vietcombank, the 1-month term interest rate increased by 0.1% to 4.4%, the 3-month term is 4.8% and the mobilizing interest rate for 6-month term is 5.5%.

At joint stock banks, the mobilizing interest rates are also adjusted up. For example, at Techcombank, the rates for 1-month and 2-month term are now listed at 4.6%, 3-month term is 4.7% and 6-month term is 5.8%. Eximbank is also posting a 1-month deposit rate of 4.6% and 5% for 3-month and 5.6% for 6-month term. Some banks have high interest rates, such as TPBank, the mobilizing interest rate of 1-month term is 5.25%, 3-month term is 5.45% and 6-month term is listed at 6.1%. Remarkably, in comparison with the listing of Lienvietpostbank, the mobilizing interest rates of the state banks are much higher. Specifically, Lienvietpostbank's 1-month deposit rates are currently 4.1%, 3-month term is 4.6%, six-month term is 5.1% and 12-month term is 6.7%.

Commenting on this issue, according to the Central Institute for Economic Management (CIEM), the mobilizing interest rates of VND at commercial banks rose at some points in the third quarter, especially for longer terms (over 12 months). Compared to June 2018, the mobilizing interest rates in the third quarter for the term of over 12 months increased by an average of 0.4 percentage points, while the fluctuation of interest rates for non-term, term under 12 months was not much.

Regarding the cause of raising mobilizing interest rates, Assoc. Dr. Nguyen Duc Thanh, director of Vietnam Institute for Economic and Policy Research (VEPR), said that this was due to the tight liquidity of the system (which was caused by the difference in mobilizing interest rates - credit, because the State Bank sold foreign currencies to stabilize the exchange rate, which also makes the total payment instruments increase more slowly...). "Of course, the tight liquidity led to higher interest rates on the interbank market, especially during the period from mid-August to mid-September. The interest for overnight and 1-week at many points has approached 4.7%, much higher than the occasion of the past Lunar New Year. The tightness of the liquidity system leads to the fact that many commercial banks have raised the mobilizing interest rate in the market 1,” Assoc. Dr. Nguyen Duc Thanh said.

Create new interest rates

Given that previously, only small banks, but now even large banks also raised their mobilizing interest rates, financial expert Nguyen Tri Hieu said that the cause of this is due to cyclicality. Specifically, in the last months of the year, banks need liquidity for getting loan source to help businesses complete their fiscal year as well as pay the costs and salary for employees.

"In the last months of the year, banks often need money to lend and disburse, so they need large deposits, so they raise the interest rates to mobilize capital. This is a cyclical phenomenon, which repeats annually. For this phenomenon, from now until the end of the year, both mobilizing interest and lending rates will increase slightly," said Nguyen Tri Hieu.

In addition to liquidity, experts also said that many banks have to push up capital mobilization, including long-term capital because the State Bank will "tighten" short-term credit for medium- and long-term loans in the future. Mr. Nguyen Tri Hieu said that the State Bank will reduce the proportion of short-term capital used for medium and long-term loans from 45% to 40%, which will be applied from the beginning of 2019. It means that banks cannot use too much short-term capital for medium and long-term lending, so they will have to prepare capital for longer-term loans from 2019. To do this, the interest rate tool will be applied naturally, so we should not expect that the interest rates will decrease in the coming time.

Moreover, according to Mr. Nguyen Anh Duong, Head of Macroeconomic Policy Department (CIEM), raising mobilizing interest rates may be the first move to catch investment opportunities in the Q4/2018 from banks. The investment opportunity that Nguyen Anh Duong mentioned is that maybe banks are considering government Treasury bonds to be issued in the Q4/2018. With the target of issuing 200,000 billion dong of government bonds in 2018, the State Treasury will have to issue a total of nearly 80 trillion dong by the end of this year.

In addition, the raising of mobilizing interest rates is also considered a measure to stabilize the value of the dong, control inflation, namely idle money in the population will be drawn into the banking system, in the context of inflation 2018 has approached the target and the economic growth has achieved satisfactory results. It is argued that raising mobilizing interest rates, on the one hand, will create new interest rates and will likely impact on lending interest rates, contributing to increasing interest rates in general. This puts pressure on businesses, affecting the results of production, business activities as well as competitiveness of enterprises. Further commenting on this issue, Assoc. Nguyen Duc Thanh said that raising interest rates to stabilize the currency in the short term can be risky for the economy. It will have implications for businesses in 2019 and 2020