Deposits flowing into banks, saving interest rates fall continuously

Deposit interest rate has been continuously reduced due to excess liquidity. Photo: H.Dịu

According to the State Bank of Vietnam (SBV), as of mid-August, total capital mobilisation of the system increased by nearly 6.3%, while credit rose only 4.13%.

Due to the impact of the Covid-19 pandemic, credit has the lowest growth rate in the past five years, while the demand for deposits at banks is still increasing, because saving is still safest compared to other investment channels.

Statistics of the State Bank showed that in the first six months of the year, the total amount of people deposited in banks topped VND 246,000 billion, while the number of deposits from economic organisations was nearly VND 171,300 billion. On average, more than VND 1,367 billion is deposited into the bank each day by people.

Recently, HSC Securities also released its money market report for August, affirming the liquidity of the banking system was at an unprecedented level, even when the State Treasury withdrew VND 189,700 billion at three banks of Vietcombank, BIDV and VietinBank from the beginning of the year. The reason was that the growth of capital mobilisation is much higher than credit.

Because of the above reasons, commercial banks continued to reduce deposit interest rates, pushing deposit interest in short-term to the lowest rate of only 2.6%/year. Thus, based on theory, the real interest rate is calculated by the nominal interest rate minus the inflation rate. Meanwhile, on average in eight months of 2020, core inflation increased by 2.66% from the same period last year. This means depositors are bearing negative interest rates for some terms at some banks.

In the past, the lowest deposit interest rate for short-term usually belonged to the group of four joint stock commercial banks having state capital. At present, Techcombank is the bank that applied the lowest deposit interest rates in the market after three consecutive downward adjustments.

In the latest deposit rate schedule applied from September 15, Techcombank continued to sharply reduce interest rates for all terms. In particular, the term of one month for customers under 50 years old is only 2.55%/year; two-month term is 2.65%/year; 3-5 month period is 2.75%/year. These terms continued to decrease by 0.2 percentage points compared to the interest rate schedule at the beginning of September.

For six-month terms, the interest rates range from 4.4-4.9%/year for ordinary customers and 4.7-5%/year for priority customers.

In contrast, Nam A Bank cut interest rates for long-term deposits. In particular, interest rates for long terms from 30-36 months decreased by 0.4 percentage points compared to the previous one, down to 6.8%/year.

Vietcombank also reduced the one-month term to 3.3%/year; 3 months down to 3.6%/year; six months down to 4.2%/year and 12 months down to 6%/year.

Meanwhile, at HDBank, the deposit interest rates for all terms decreased by 0.15-0.4%/year, down to 3.8%/year for one-five month terms; 5.8%/year for 6-11 month term.

At NCB, deposit rates for long terms were also reduced, as 18-36 month terms decreased by 0.3 percentage points compared to before, to 7.5%/year. TPBank is also applying the saving interest rate for 3-month term is 3.65%/year.

The money market strategy report of SSI Securities Company showed that in August, deposit interest rates decreased by 0.2-4 percentage points for short terms and 0.2 percentage points for long terms. Accumulated in eight months, deposit interest rates decreased by a total of 0.5-2.1 percentage points for all terms compared to the end of last year.

Not only deposit interest rates from residents, in the interbank market last week, the interbank interest rates for overnight, one week and two week terms all dropped by 0.02%; 0.05% and 0.04%, from 0.16%/year; 0.25%/year and 0.27%/year down to 0.14%/year; 0.2%/year and 0.23%/year. This showed abundant liquidity at banks, making them almost give away when borrowing from each other.