Deposit rates fell quickly but lending rates fell slowly

	Lending interest rates are under increasing pressure
	Banks offer higher deposit rates after credit growth quota expanded
	Interest rate can set new ground: Going up or down?

Businesses always want to be supported on interest rates to access cheap capital. Photo: Internet

Currently, on the interbank market, interest rates have decreased for nearly two weeks. In the week to the end of March, according to the SBV, the average overnight interbank rate in VND has dropped sharply to only 1.55%/year. Along with that, for a one-week term, the average interbank interest rate was at 1.98% and 2.26%/year for a two-week term. For terms from one month to nine months, the average interbank interest rate was at 4.44%, 7.49%, and 8.46%/year, respectively.

Simultaneously, to support system liquidity, on the open market, the SBV stopped issuing new bills to attract money from the beginning of last week, after more than a month of continuous use.

Meanwhile, in the world market, as expected, the US Federal reserve (Fed) raised interest rates for the ninth time since the beginning of last year. However, the increase was only 0.25 percentage points, bringing the overnight lending rate to 4.75-5%.

According to analysts, the Fed's interest rate hike will not have a big impact on the Vietnamese market, and maybe just have short-term psychological effects. Therefore, it is expected that the "expensive" period is coming to an end, especially when the domestic deposit interest rate has been falling deeply.

Movement of 12-month term deposit interest rates for institutional customers

Specifically, four state-owned "big players" including Vietcombank, BIDV, Agribank, and VietinBank are currently listing a maximum savings interest rate of only 7.2%/year. The group of joint stock commercial banks are listing the average 12-month term interest rate at 7.8%/year, down 41 basis points compared to the end of January 2023.

However, in a petition sent to the SBV, voters in Quang Binh province reflected that in fact, when there was a policy to reduce deposit interest rates, a series of banks reduced deposit interest rates immediately, including those who had deposited first and later. However, when there was a policy to reduce loan interest rates, banks took a long time to reduce the amount of money for borrowers at that time, and previous borrowers were not allowed to reduce it.

Responding to this issue, the SBV said that for deposit interest rates, according to current regulations, the SBV stipulated maximum interest rate for demand deposits and terms of less than six months in VND, and the application of the specific deposit interest rate would be considered and decided by credit institutions on the basis of market capital supply and demand, the operation situation of the credit institution; deposit interest rates for six months or more were fixed by credit institutions on the basis of market capital supply and demand.

In case the market interest rate fluctuates or the SBV adjusts the operating interest rates, leading to the credit institutions adjusting to increase or decrease deposit interest rates, customers continue to comply with the committed agreement on interest rates until the deposit maturity date.

As for lending interest rates, according to current regulations, the lending interest rate is decided by a credit institution and its customer according to the market capital supply and demand and the credit level of the customer.

Similar to the deposit interest rate, in case a credit institution reduces the lending interest rate, for loans that the credit institution and its customer have agreed on the interest rate, the credit institution continues to apply the agreed interest rate until the end of the loan term or to the end of the interest payment term according to the loan agreement between the credit institution and the customer.

The SBV said that it was currently regulating the maximum short-term lending interest rate in VND (at 5.5%/year) of credit institutions for a number of priority areas under the policy of the Government (rural agriculture, export, small and medium-sized enterprises, supporting industries, and high-tech application enterprises).

Additionally, the SBV has directed credit institutions to minimize unnecessary operating costs, administrative procedures, and expenditures to reduce lending interest rates, thereby supporting businesses and individuals to restore production and business. Moreover, the SBV has directed credit institutions to grow credit at a reasonable rate, guiding credit to production and business fields, priority fields, and economic growth drivers according to the Government's policy; continued to strictly control credit in potentially risky areas; and facilitated businesses and people to access bank credit capital.