The hard liquidity, increasing credit, interest rates are under upward pressure
According to a survey, since the beginning of May, banks are continuing to increase deposit rates for many terms with an increase of about 0.1-0.5%.
The macroeconomic update report of VNDirect Securities Company stated that the decision of the US Federal Reserve (FED) to raise the operating interest rate has had a multifaceted impact on the Vietnamese economy. In which, rising USD interest rates and inflationary pressure are putting pressure on domestic interest rates, VND deposit interest rates are expected to increase by 20-40 basis points in the last months of the year.
But VnDirect believes that the twelfth-month term deposit interest rate of commercial banks can increase to 5.9-6.1%/year by the end of 2022 (currently at 5.5-5.7%/year), which is still lower than the pre-pandemic level of 7.0%/year.
The gap between credit growth and deposit growth is widening. |
In addition, according to experts, the reason for the increase in interest rates is that many banks have a liquidity shortage to supplement when credit growth is very positive. This is reflected in the difference between credit and deposit, which has fallen to the lowest level in eight years.
Data from the State Bank of Vietnam (SBV) shows that credit as of April 25 has increased by 6.75% compared to the end of 2021 (equivalent to 16.4% over the same period) while capital mobilization only increased by 3.55% (equivalent to 10.7% over the same period).
In Ho Chi Minh City, by the end of April 2022, the credit balance in the area reached over VND3 quadrillion, an increase of about 7% compared to the end of last year. However, the total capital mobilization of credit institutions in the area is estimated to increase by 2.74% compared to the end of 2021, much lower than the credit growth rate.
Since March, the State Bank has continuously injecting money to banks through the open market channel, and lending interest rates in the interbank market have remained at a high level of over 2%/year due to the shortage of liquidity.
Regarding this issue, economic expert Dr. Le Xuan Nghia said that interest rates are under increasing pressure from the bad debt situation. Currently, bad debts are hidden by regulations on debt extension and postponement. Since June this year, the extension and postponement regulations expire, the number of bad debts increases, and the provisioning for risks also increases. Banks will need liquidity to lend, so deposit rates will be pulled up.
With these developments, experts of SSI Research believe that monetary policy is managed "softly" in the first months of the year, although the operating pressure on the State Bank is increasing. The lending interest rate level is still stable, while the improved credit leads to an increase in the deposit and interbank interest rates. In the short term, SSI believes that the risk of monetary policy changes from the State Bank is not much when the Government is still focusing on recovering the economy after Covid-19.
Sharing the same opinion, VnDirect experts expect that the State Bank will maintain an "appropriate" monetary policy with a priority on supporting the economy's recovery, at least until the end of the second quarter of 2022. The reason is that inflationary pressure is expected to increase in the coming months, domestic demand is weak and has not fully recovered to pre-pandemic levels and the SBV prioritizes the goal of maintaining low lending rates to support business and economic recovery.
Selling unsecured debts should become common practice |
Regarding the impact on lending interest rates, the State Bank is preparing to deploy an interest rate compensation package, so experts and businesses believe that this can help reduce the average lending interest rate by 20-40 points in 2022. However, the actual impact of the interest rate subsidy package on businesses and the economy could be lower if commercial banks raise lending rates for other conventional loans to offset the increase in deposit interest rates.
Related News
Difficulty in finding banks eligible to receive compulsory transfers
15:49 | 25/10/2024 Finance
Urging credit flow into production and business sectors
16:19 | 20/09/2024 Finance
Pressure on exchange rate plunges
18:02 | 01/09/2024 Finance
Revising SCT on automobiles must ensure harmony of benefits
14:12 | 02/08/2024 Regulations
Latest News
Many factors affecting tuna exports in the last months of the year
19:38 | 02/11/2024 Import-Export
Vietnam still dominates Philippine rice import
19:36 | 02/11/2024 Import-Export
Vietnam cements ties with partners to engage in global semiconductor, AI industries
19:35 | 02/11/2024 Import-Export
Aquatic exports expected to rise in year-end despite challenges
19:33 | 02/11/2024 Import-Export
More News
Trade Defense: The Key to Success for Vietnamese Businesses
10:39 | 02/11/2024 Import-Export
Lao Cai Customs sees a triple-digit surge in export-import turnover
10:37 | 02/11/2024 Import-Export
Coconut is expected to become a billion-dollar export item
16:40 | 01/11/2024 Import-Export
Plastic exporters interested in converting to recycling technology
16:36 | 01/11/2024 Import-Export
Logistics sector must embrace innovative trends to stay competitive
16:34 | 01/11/2024 Import-Export
Vietnam’s agro-forestry-aquatic product exports likely to set new record
16:32 | 01/11/2024 Import-Export
UKVFTA greatly benefits Vietnam-UK trade: Experts
14:19 | 31/10/2024 Import-Export
Agricultural exports likely to exceed 60 billion USD amid challenges
14:18 | 31/10/2024 Import-Export
Vietnam-Philippines trade likely to exceed 8 billion USD for first time
14:17 | 31/10/2024 Import-Export
Your care
Many factors affecting tuna exports in the last months of the year
19:38 | 02/11/2024 Import-Export
Vietnam still dominates Philippine rice import
19:36 | 02/11/2024 Import-Export
Vietnam cements ties with partners to engage in global semiconductor, AI industries
19:35 | 02/11/2024 Import-Export
Aquatic exports expected to rise in year-end despite challenges
19:33 | 02/11/2024 Import-Export
Trade Defense: The Key to Success for Vietnamese Businesses
10:39 | 02/11/2024 Import-Export