Interest rates decreasing, but money still pouring into banks

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Depositsare still flowing into banks although interest rates are not as high as in previous years.Photo: Internet

The number of deposits still increased

Since the outbreak of Covid-19, in order to contribute to the reduction of lending interest rates, the savings interest rates at commercial banks have continuously decreased. According to the latest information on banking activities from the State Bank of Vietnam (SBV), the deposit interest rates in VND of credit institutions continue to fallcompared to the end of 2019. Currently, the deposit interest rates in VNDisat 0.1-0.2% / year for demand deposits and terms less than 1 month;3.3-3.9% / year for term deposits from 1 month to less than 6 months;4.2-6.0% / year for term deposits from 6 months to less than 12 months;tenors from 12 months or more are at 5.8-6.9% / year.

At BIDV, except for the 9-month term with a decrease of 0.3%, the other tenors had a flat reduction of 0.2%.Accordingly, the interest rate schedule changes and ranges from 3.3 - 5.8% / year when depositing for1-36 month terms.

At Vietcombank, the highest interest rate of this bank is currently only 5.8% / year, while at the same time last year it was 7% / year.The private commercial banking sector has also brought the interest rate for terms below 6 months to below 4% / year according to the regulations on the ceiling rate of the State Bank.

Although the deposit interest rate dropped, market statistics show that excess money from people and businesses is still pouring into banks.Data from the State Bank of Vietnam showed that as of the end of September, the whole sector's mobilization growth reached VND9.8 trillion, up 14.12% and 8.92% over the same period and at the end of 2019, respectively.

Meanwhile deposits in domestic currency increased by 9.19% and foreign currencies increased by 6.32% compared to the end of last year.

Banks also showed a sharp increase in the number of deposits.For example, at Vietcombank, customer deposits still reached VND982,429 billion by the end of September 2020, an increase of nearly VND54,000 billion compared to the beginning of the year.While credit reached more than VND783,757 billion, an increase of more than VND49,000 billion compared to the beginning of the year.

At Techcombank, the bank has the lowest interest rate today, customer deposits atthe end of September 2020 also reached more than VND252,572 billion, an increase of more than VND21,275 billion compared to the beginning of the year, equivalent to an increase of more than 9%.

Notably, the number of deposits at small banks increased even more.NamABank increased 31%, VietBank increased 23%, Kienlongbank increased 21%, TPBank increased 18%, andBacABank increased 14.1%.

Cash flow "smarter"

According to experts, the low credit growth at banks is the main reason that the deposit interest rates are under pressure to decrease, even further decrease overthe rest of the year.Moreover, the interbank interest rate is also very low, showing that bank liquidity is abundant; the need to mobilize more capital from the people and businesses is not as great as in the same period of previous years.Up to now, the deposit interest rate level has decreased by a total of 50-200 percentage points for all terms compared to the beginning of this year.

However, with the mentality of the people and investors aroundthe country, bank savings is still a safe form of investment, especially in areas that do not have access to investment channels such as securities and real estate.

Moreover, according to financial experts, after Covid-19, when entering a new normal phase, investors are also more experienced, investors have been pursuingsafer investment strategies and portfolio diversification. According to economic expert Thai Viet Dung, bank savings arean investment channel for individuals who do not have much knowledge about other channels. Currently, the profit margin of this investment channel is only about 6-8% / year, but the advantage is absolute safety because the Vietnamese banking system is protected by the Government, so when the bank has problems, the customersalso never losesmoney.

Also in this regard, finance - banking expert PhD.Can Van Luc said, three principles when investing should be noted: diversifying the investment portfolio and channels;don't use too much leverage;and avoid herd psychology.Mr. Luc recommended that the main channels for personal investment are saving money;investment in gold and foreign currencies;securities investment;real estate investment;start-up investment, share capital contribution.

According to experts, in addition to the above traditional investment channels, there are now new investment channels in the market such as forex, electronic money, derivative goods. However, these channels all have advantages.Certain points and limitations should require investors to be knowledgeable and experienced.Currently, when the pandemic ends, it is certain that the volatility of investment channels will continue and introduce new laws from the market.Therefore, investors need to seize the opportunity, direct cash flow in a "smarter" way.