Lending interest rate decrease keeps slow peace with deposit interest rates

	Bank lending interest rates will be cut at appropriate time: SBV chief
	State Bank explains why lending interest rates are still high
	The “big banks” continuously reduce lending interest rates, pushing up credit demand

The increasing flow of cheap capital gives banks more room to reduce lending interest rates. Photo: Internet

During the regular Government meeting in September, Standing Deputy Governor of the State Bank (SBV) Dao Minh Tu said that by September 30, credit was estimated to increase by about 6.1-6.2% year on year but slower than last year due to objective reasons, external impacts as well as difficulties of domestic businesses.

As usual, credit will witness an uptrend in end-year months thanks to drastic measures with the companionship of localities to facilitate and lift obstacles for businesses amid difficult times. However, Mr. Dao Minh Tu also noted that credit access needs to be viewed and evaluated from many sides. Not only banks but the companionship of ministries, branches, localities, and the rise of businesses themselves also play crucial points.

In fact, contrary to the uptrend in the last months of the year, to attract capital to serve the needs of people and businesses, in the early days of the fourth quarter of 2023, many large banks continued to adjust and lower mobilization interest rates. In the latest deposit interest rate table dated October 3, the Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) reduced a series of savings interest rates by a maximum of 0.2 percentage points. Accordingly, the highest listed interest rate at Vietcombank decreased to 5.3%, lower than the Covid-19 period (around 5.8%/year). Deposits from 1 to less than 12 months fluctuated 3-4.3% per year.

At the remaining three state-owned banks, Agribank, BIDV, and VietinBank, after the adjustment in September 2023, the highest interest rate is currently at 5.5% per year.

According to the newly published analysis report of VNDirect Securities Company, as of September 25, the average 12-month term deposit interest rate of state-owned banks was decreased to 5.5%/year, a decrease 0.3 percentage month and month and down 1.9 percentage points compared to the beginning of the year.

Meanwhile, 12-month deposit interest rates of private banks range from 5.1% to 6.3%/year with an average of about 5.7%/year, down 0.3 percentage points month on month and down 2.6 percentage points compared to the beginning of the year. Among private banks, the average 12-month deposit interest rate decreased most sharply in September at some banks such as Sacombank, VIB, OCB, and TPBank with a decrease of about 0.6-1.0 percentage hundred points compared to the average interest rate last month.

Dr. Nguyen Huu Huan, Head of the Department of Financial Markets, Ho Chi Minh City University of Economics, assessed that lending interest rates have recently tended to decrease, but the decrease is not much and the decrease speed is slower than deposit interest rates. This is back to the previous with high-mobilized interest rates and long terms of over 12 months. Currently, that high-priced capital flow still exists. Therefore, in spite of recent deposit interest rate decreases, banks still have to balance capital to slow down lending interest rates. In addition, banks' excess capital also accumulates interest costs, affecting the reduction of lending interest rates.

Dr. Nguyen Huu Huan predicts the ongoing downtrend of interest rates in the coming time because the increasing flow of cheap capital helps banks have more room to reduce lending interest rates. In addition, due to capital surplus, banks also tend to compete with each other to attract borrowers. Banks also take advantage of the provisions of Circular 06/2013/TT-NHNN on allowing loans from one bank to repay another bank. "Currently is a golden time for businesses and people to borrow capital at preferential interest rates and receive a lot of support from banks" - Dr. Huan commented.

However, Dr. Huan also pointed out that the current key problem does not lie with banks but is due to the disability of eligible capital access. One of the difficulties reported by many businesses is related to bad debts arising during the COVID-19 period. Accordingly, although the enterprise has paid off all of these bad debts, the information is still suspended on the CIC Credit Information Center, which hinders them from getting loans in spite of available collateral assets and legal cash flow... According to regulations, businesses will have to wait 5 years before this information is deleted on CIC.

In fact, businesses encounter common obstacles related to such bad debts. Therefore, the State Bank and commercial banks should consider deleting CIC information dating back to the COVID-19 period which enables businesses to access loans if they satisfy the current conditions. This will lift bottlenecks of capital surplus in the banking system" - Dr. Huan suggested.