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Savings interest rates increase rapidly, deposit-credit gap has not improved

08:31 | 23/10/2022

VCN - The level of savings interest rates at commercial banks has continuously increased since the State Bank of Vietnam (SBV) raised the operating interest rate in the last days of September 2022.

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Savings interest rates increase rapidly, deposit-credit gap has not improved
Savings interest rates at many banks continued to increase in the early days of October. Photo: Internet

Savings interest rate is nearly 9% per year, but capital mobilization is slow

According to the survey, banks, including the "Big4 group" of state-owned commercial banks or joint stock commercial banks, have all adjusted the deposit interest rate in most terms with an increase of 0.1-2%. At 1 - 3 month terms, many banks push the interest rate to the ceiling of 5% per year. As for the 6-month term, some banks mobilize up to 7% per year.

With terms over 12 months, the highest interest rates on deposit products are up to 8.4% per year. Even some banks have high-interest rates on savings deposits for 13-month terms, up to 8.8% per year, but the deposit amounts to hundreds of billions of dollars.

Notably, before this increase in deposit interest rates, several commercial banks had sharply increased deposit rates many times in the previous months. According to the results of the survey on business trends of credit institutions in the fourth quarter of 2022 by the State Bank, more than one-third of credit institutions said that they had slightly increased marginal interest rates.

Not only raising interest rates, banks also promote promotional programs and interest rates to attract idle cash flow from residents. This has helped the deposit interest rate level of many commercial banks return to the pre-Covid-19 period.

However, although banks are constantly raising the deposit interest rate, it is still difficult to attract money from the people, especially when credit growth is twice as high as capital mobilization.

The report on the socio-economic situation in the third quarter and the first nine months of 2022 of General Statistics Office said that as of September 20, 2022, the total means of payment increased by 2.49% compared to the end of 2021 (it increased by 4.95% at the same time in 2021). Capital mobilization by credit institutions increased by 4.04% (it increased by 4.28%in the same period in 2021) while the credit growth of the economy reached 10.54% (it increased by 7 .17%in the same period in 2021), equivalent to 2.6 times the growth rate of capital mobilization.

Worry about increasing loan interest rates

Therefore, many forecasters believe that deposit interest rates continue to increase in the last months of this year. This leads to pressure to increase lending rates. Even if banks cut costs as called by the State Bank, it is difficult to keep stable lending rates.

Moreover, not only deposit rates but also interest rates on the interbank market increased significantly. Interbank interest rates have skyrocketed from less than 1% per year to 6-7% per year in terms of tenors.

UOB Bank's report on Vietnam's economic growth in the fourth quarter of 2022 said that in the context of the US Federal Reserve's stance that interest rates would continue to rise sharply, the US dollar would continue to appreciate, the Vietnam dong would depreciate further and the inflation rate is near the target of the SBV, it was likely that the SBV would increase the refinancing rate by 1 percentage point within the next 2 quarters. This would bring the refinancing rate to 5.5% by the end of 2022 and then to 6% by the end of the first quarter of 2023, equal to the level announced just before Covid-19 was declared a global pandemic in March 2020.

Previously, many analysts also forecast that the SBV might increase the operating interest rate to reduce pressure on the exchange rate in the last months of the year.

Analysts of SSI Securities Company said that towards the end of the year, the pressure on the exchange rate would become greater, and it was not excluded that the State Bank would continue to increase the operating interest rate to reduce pressure on the exchange rate. According to SSI, the SBV would try to keep liquidity in the banking system at a state that was not too abundant for the rest of the year to maintain the VN dong interbank interest rate in the range of 5-5.5% to create a high level of reasonable difference with US dollar interest rate, minimizing pressure on exchange rate.

However, experts at ACB Securities Company (ACBS) said that from now until the end of this year, the State Bank des not have any more interest rate hikes. According to ACBS, the SBV's recent moves were to cope with the increasing devaluation pressure on the VN dong. Therefore, the SBV might raise the operating interest rate by 50 basis points in the first two quarters of 2023 to control inflation and support the exchange rate.

At the Government press conference on October 1, Deputy Governor of the SBV Doan Thai Son said that the SBV had increased some ceiling interest rates on deposits for commercial banks to give priority to controlling inflation, stabilizing the macroeconomic economy and ensuring the maintenance of positive real interest rates on deposit to harmonize the interests of the participants in the money market. At the same time, this also created conditions for the banking system to continue to attract deposits and have financial sources for lending, supporting the economy in the coming time. Therefore, the SBV mobilized credit institutions to continue reviewing to reduce operating costs, thereby creating financial conditions to stabilize the lending interest rate to support people and enterprises next time.

By Huong Diu/ Binh Minh