Lending rates set to be stable despite deposit rate surge
Though deposit interest rates have increased significantly this year, experts forecast lending rates will remain relatively stable to support economic recovery.
Finance and banking expert Dr Dinh Trong Thinh told Viet Nam News that to attract idle money, many banks have increased deposit interest rates significantly over the last year to compete against other more attractive investment channels such as real estate, bonds and stocks.
Currently, some banks are even listing the deposit interest rate at more than 7 per cent per year, compared with the highest rate of around 6 per cent last year.
Saigon Commercial Joint Stock Bank (SCB), for example, is applying online deposit interest rate of up to 7.35 per cent per year for terms from 18-36 months, while the rate at Nam A Commercial Joint Stock Bank (Nam A Bank) is 7.4 per cent for 16-36 month deposits.
“However, I expect the lending rate rise this year will be modest as the Government has planned to keep interest rates stable to support the production and business after the pandemic,” Thinh said.
“The Government’s interest rate incentive programmes will also help minimise the rise.”
The State Bank of Viet Nam (SBV) is implementing an interest rate incentive package worth VND3 trillion for COVID-19 hit enterprises.
In addition, the Government has planned to expand the scale of the package to VND40 trillion, focusing on small- and medium-sized enterprises; enterprises participating in several key projects; and enterprises in the tourism, aviation and transportation industries.
Analysts from VNDirect Securities Company expect the interest rate incentive package can help reduce the average lending interest rate by 20-40 basis points in 2022.
However, it noted that the actual impact of the interest rate cut from the package on enterprises and the economy could be lower if commercial banks increase lending rates on other conventional loans to offset the increase in deposit interest rates.
Thinh also forecast the SBV would keep the policy interest rate unchanged this year to help commercial banks keep their lending interest rates stable.
Echoing Thinh, chief economist of Joint Stock Commercial Bank for Investment and Development of Viet Nam (BIDV) Can Van Luc said while people with idle money want to change their investment channels and inflationary pressure is rising, many banks have to increase saving interest rates to lure depositors.
However, it will be difficult for lending interest rates to increase because the banking sector has to support the economy according to the economic recovery programme that the National Assembly and the Government have approved, Luc said.
Finance expert Huynh Trung Minh said the SBV had required banks to reduce lending interest rates by about 0.5-1 percentage points to continually support individuals and firms to restore production and business after the pandemic.
Therefore, though an increase in deposit interest rates in the last three months will affect lending rates, it will be insignificant as the SBV is doing well in controlling interest rates.
Industry insiders admitted though deposit rates have increased at many banks recently, lending rates will be stable.
Nguyen Dinh Tung, general director of Orient Commercial Joint Stock Bank (OCB), said while deposit interest rates increased, lending interest rates for firms can decrease by 0.2-0.5 percentage points, depending on the situation of each firm.
Despite deposit interest rate hikes, banks still have to cut lending rates to attract borrowers as the competition among banks is high, Tung said, adding that the OCB has to accept this ‘game’.
“We are trying our best to lower lending interest rates for our customers through reducing capital costs and diversifying input capital sources," Tung said.
According to Nguyen Duc Lenh, deputy director of the SBV’s HCM City branch, by the end of April 2022, outstanding loans in HCM City reached more than VND3 trillion, an increase of about 7 per cent compared to the end of last year.
This is the highest growth rate compared to the same period in many years. The surge was mainly due to rising capital demand for production and business of enterprises thanks to a rapid economic recovery in HCM City.
To aid businesses, the SBV’s HCM City branch has recently issued a written request to HCM City-based banks to keep lending interest rates unchanged for firms that participate in the city’s price and market stabilisation programmes, Lenh said.