Major banks decide to reduce deposit interest rates

Major banks decide to reduce deposit interest rates

Several banks have decided to lower their deposit interest rates though the State Bank of Viet Nam (SBV) has kept its cap unchanged at 7.5 per cent.

On May 6, the Joint Stock Commercial Bank for Foreign Trade of Viet Nam, or Vietcombank, suddenly cut its rates.

Some major banks like BIDV and Vietinbank followed suit, also trimming their rates.

BIDV cut the interest rate to 6 per cent for one-month and 6.5 per cent for two-month deposits.

Vietinbank cut the rates on all deposits of less than 12 months by 0.5 percentage point to 7 per cent.

But when Agribank decided to sharply cut the rate on one-month deposits to 5 per cent – a record low rate – the floodgates truly opened and the rest of the major banks followed.

Techcombank trimmed all its deposit interest rates, with the lowest level being 6.85 per cent.

Asia Commercial Bank has announced new rates of 7.2-7.3 per cent for less than a year, depending on the term.

After the adjustments, their average deposit rates have become 0.65 per cent lower than the central bank's 7.5 per cent cap, analysts said.

The country's four state-owned giants – Vietcombank, Agribank, Vietinbank, and BIDV – on May 13 cut their old loan interest rate to 13 per cent per year and for the five priority categories, to 10 per cent.

The rates had been 13 per cent and 15 per cent before the cuts.

Economist Nguyen Tri Hieu told Lao Dong newspaper that State-owned banks could cut deposit and loan rates because they easily get deposits.

"Most of their depositors are State-owned companies who always deposit their money at State-owned banks regardless of the interest rate," he explained.

"So their cash resources are always stable."

But smaller banks have to consider carefully before making any interest rate adjustments to retain their clientele.

The smaller non-State banks, sooner or later, would have to cut their deposit rates to reduce cost, he said.

He expected interest rates on short-term deposits to fall further to 6-7 per cent in two or three months without affecting banks' ability to attract deposits.

At that time the banks would cut their short-term loan interest rates to around 10 per cent, he added.

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