Interest rate can set new ground: Going up or down?

Large banks have little change in interest rates. Source: Internet

Deposit rates inch up

In early April, the survey of interest rates of some banks showed that most banks still maintained the deposit rates in the range from 1 to 36 months that were deployed previously. In which, the highest level belonged to Eximbank with 8.4%/year. The remaining banks still maintained the highest savings interest rates at below 7%/year.

In March, the bank deposit rates started to inch up after a long time, banks reduced interest rates such as: Techcombank and VPBank.

However, although the deposit rates increased, the group of 10 commercial banks with the highest size of savings in the system had little change in interest rates.

For example, Vietcombank, Vietinbank, BIDV and Agribank have not changed the interest rate schedule since February. Agribank, BIDV and Vietinbank are maintaining the highest savings interest rate at 5.6%/year.

According to estimates by the General Statistics Office, as of March 19, 2021, money supply growth reached 1.5% and capital mobilization growth reached 0.5% compared to the end of 2020. Meanwhile, credit rapidly increased in the first quarter with an increase of 1.5% compared to the beginning of the year, significantly higher than the growth rate of 0.7% in the same period in 2020.

The experts said that credit growth in the first quarter was faster than the previous year, while deposit growth did not increase at the same rate, which could be the reason why deposit rates increased.

Lending interest rate is not commensurate

With the above situation, many forecasts state that interest rates will set new ground in the second quarter of 2021. A report by Rong Viet Securities Company stated that interest rates will increase at a modest level in 2021 as inflation is still under control and monetary policy is still maintaining a supportive direction.

According to HSBC's forecasts, the economy is still negatively affected by the Covid-19 pandemic, many industries will have to take more time to recover, so other investment channels such as securities, real estate, bonds will also be riskier. In that context, the banking savings channel will still be a safe option for people. In addition, deposit interest rates are tending to go up, attracting people's deposits.

According to Deputy Governor of the State Bank of Vietnam (SBV) Dao Minh Tu, interest rates are one of the important indicators in managing monetary policy and have been implemented drastically.

However, many said that the reduction of lending interest rates was not commensurate with the deposit interest rates, still at a high level compared to regional competitors such as China and Thailand.

Specifically, in 2020, the lending interest rate has decreased from 1-1.5%/year, lower than the decrease in deposit interest rates by 2-2.5%/year. As a result, the net profit margin (NIM) of most banks has increased dramatically in the second half of 2020 and is currently at a historic high of about 4%.

According to finance - banking expert TS. Can Van Luc, Vietnam's interest rate is still high when compared to some countries in the region because Vietnam's inflation is higher than many countries. The risks of Vietnamese enterprises and the economy are higher; the difference between the input and output interest rates of some countries in the region is more than 3%, but in Vietnam, it is only about 2.6%.

With the above issues, Deputy Governor of the State Bank Dao Minh Tu said that the administration of interest rate policy is still on the first view that it is stable for both deposit and lending interest rates.

However, it must be careful with the signs of impact on the world economy. If those factors remain positive, the SBV will continue to seek ways to reduce both deposit and lending rates. At the same time, to direct credit institutions to focus on limiting, reducing costs, and facilitating further lowering of interest rates for businesses and people.