After two weeks of lowering lending interest rates for short-term VND loans following the State Bank of Vietnam (SBV)’s cue, several commercial banks have reduced their deposit interest rates.
On July 25, the Vietnam Export-Import Commercial Joint Stock Bank (Eximbank) lowered its annual interest rates for under-six-month deposits by 0.1-0.2 percentage points.
Accordingly, the rate for one-month deposits was reduced from 4.7 percent to 4.6 percent, two-month deposits from 4.9 percent to 4.8 percent, three-month deposits from 5.1 percent to five percent and six-month deposits from 5.8 percent to 5.6 percent.
The Vietnam Prosperity Commercial Joint Stock Bank (VPBank) also adjusted interest rates downwards for deposits of one to three-month terms.
Some other banks were quoted by Nguoi Lao Dong (The Labourer) as saying they are following market movement and could change interest rates at any time.
Eximbank General Director Le Van Quyet admitted that the bank had reduced its lending rates but found difficult to lend while it still had to pay interest for deposits, thus it had to lower its saving rates to ensure business efficiency.
According to SBV’s HCM City branch, in the first six months of the year, total amount of deposits mobilised by commercial banks in the city reached 1.8 quadrillion VND (80 billion USD) while total lending was only 1.63 quadrillion VND, proving that commercial banks have abundant liquidity.
Do Minh Toan, General Director of the A Chau Commercial Joint Stock Bank (ACB), said enterprises’ demand for capital in the next three months will likely not go up, adding that the bank has to maintain average short-term deposit interest rate at 4.9 percent to ensure its interest income.
Declining interest rates is a positive signal for the economy, banking expert Nguyen Tri Hieu said, adding that only commercial banks which have excess capital have grounds to adjust deposit interest rates downwards.
Earlier, on July 7, SBV issued a decision to cut annual refinancing interest rate, rediscount interest rate and overnight interest rate applied to electronic inter-bank payments, and the rate of loans to offset capital shortage in clearing of payments between SBV and domestic banks by 0.25 percentage points.
The maximum annual short-term interest rate for loans in VND by credit institutions to meet customers’ demand for capital in some prioritised sectors has also been cut by 0.5 percentage points from 7 percent.
Following the decision, commercial banks started announcing lending rate cuts. However, experts predicted that banks which have cut the rates might face a further decline in the net interest margin (NIM) if they do not lower deposit interest rates accordingly.
NIM is the ratio of net interest income to invested assets, with net interest income being the difference between interest income and interest expense.