In 2024, there will still be room for further interest rate reductions in banks. (Image: PV/Vietnam+)
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With the requirement for banks to publicly disclose lending interest rates, deposit interest rates will also continue to be adjusted down. Therefore, experts believe that there is still room for further interest rate reductions in lending in 2024.
Requirement for public disclosure of interest rates
Mr. Pham Chi Quang, Head of the Monetary Policy Department (State Bank of Vietnam) said that the State Bank of Vietnam has issued Directive 01 on the implementation of tasks in 2024. In which, credit institutions are directed to publicly disclose and take responsibility for the average lending interest rates of each credit institution and the difference between average deposit and lending interest rates on the website of each credit institution. The State Bank of Vietnam has requested commercial banks to summarize and evaluate interest rates to strictly implement the Government’s directive.
“To avoid misunderstanding when announcing average interest rates, the State Bank of Vietnam does not limit credit institutions from disclosing detailed customer groups, customer classifications… as it is the jurisdiction of credit institutions,” said Mr. Pham Chi Quang.
On this issue, Mr. Pham Nhu Anh – CEO of MB Bank, expressed his view that regarding the requirement to publicly disclose average lending interest rates according to Directive 01, MB Bank is ready to calculate and collect data to disclose information as directed.
However, the leaders of some banks believe that announcing average lending interest rates for short-term loans is “not a problem” for banks because the difference between input and output interest rates for short-term loans is not significant, so customers do not react.
But for medium and long-term loans, announcing lending interest rates is very difficult for banks.
The CEO of a joint-stock commercial bank in Hanoi cited an example: “Recently, we have reduced interest rates by 1.5% – 2%, some customers have received a reduction of up to 3%, but there are still customers borrowing at an interest rate of only 10% – 11% per year for medium and long-term loans but they still complain to the bank because the deposit interest rate is currently only 6% – 7% per year, even as low as 2.7% for short-term deposits. If we announce the average lending interest rate for the entire bank, existing borrowers will react and continue to demand a reduction in the interest rate they are currently accepting, even though they have been privileged in the past 12 months. This is difficult for the bank.”
Therefore, this CEO proposed that the State Bank of Vietnam reconsider the public announcement of average lending interest rates.
Business customers hope that interest rates will be further reduced to support business recovery. (Image: PV/Vietnam+)
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Some bank executives also expressed their desire to focus only on publicly disclosing average lending interest rates to individual customers. Because business customers have their own characteristics, interest rates depend on the overall benefits from organizations, so interest rates will not be the same, making it difficult to have an average rate.
Potential for further interest rate reductions
According to experts, the public announcement of lending and deposit interest rates is necessary to increase transparency, allowing customers to compare and choose. Currently, the lending interest rate levels of different banks are quite distinctive, depending on the borrowing subjects and capital costs, bad debts… Many enterprises also complain that lending interest rates are still very high.
Because of this, the leaders of the State Bank of Vietnam emphasized that the Prime Minister has directed and the banking sector must implement. This is the regulation of operation and it is also the basis for commercial banks to continue reducing lending interest rates as soon as possible.
In fact, the trend of reducing deposit interest rates is still ongoing. According to the latest data from the State Bank of Vietnam, the average deposit and lending interest rates of new transactions of commercial banks have decreased by about 0.15% per year and 0.25% per year respectively compared to the end of 2023.
In February 2024, 19 banks announced a reduction in deposit interest rates, including joint-stock commercial banks such as VPBank, VIB, NCB, Sacombank, Techcombank, Viet A Bank… made their second adjustment since the beginning of the month.
Up to now, no bank maintains a deposit interest rate for a 6-month term above 5% per year. For 9-11 month deposits, only VietBank applies an interest rate of 5% per year, other banks list interest rates below 5% per year, even below 4% per year such as MSB, SeABank; MB 3.9% per year and Techcombank is 3.7% per year.
Reduced deposit interest rates help banks reduce input costs, which in turn leads to a reduction in lending interest rates, stimulating lending demand.
Mr. Pham Toan Vuong, CEO of Agribank, said that since the beginning of 2024, Agribank has reduced deposit interest rates twice with a reduction rate of 0.3% – 0.5% per year and reduced short-term lending interest rates with a reduction rate of 0.5% – 1% per year. Currently, Agribank’s average lending interest rate has decreased by 0.42% per year compared to the beginning of 2023 and decreased by 0.13% per year compared to the beginning of 2024 (commonly at 7% – 9% per year for short-term loans and 9% – 9.5% per year for medium and long-term loans).
“In 2024, Agribank will continue to manage deposit interest rates similar to other state commercial banks, contributing to stabilizing market psychology, while actively reducing operating costs to reduce lending interest rates,” emphasized Mr. Vuong.
Agribank has reduced deposit interest rates twice and reduced short-term lending interest rates. (Image: PV/Vietnam+)
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Forecast for interest rate trends, experts from SSI Securities Company’s research center (SSI Research) believe that the State Bank of Vietnam still has room to further reduce operating interest rates. Current lending interest rates may have the opportunity to be reduced by an additional 50-100 basis points in the first half of 2024.
Mr. Dao Minh Tu – Deputy Governor of the State Bank of Vietnam said that operating interest rates are still maintained to create conditions for credit institutions to access low-cost capital sources from the State Bank of Vietnam to support the economy. Interest rates will be managed in accordance with market developments, macroeconomics, inflation and monetary policy objectives.
The Deputy Governor affirmed that the State Bank of Vietnam always encourages credit institutions to reduce costs, simplify credit granting procedures, strive to reduce the average lending interest rate to support the economy. /.
Thuy Ha
