Interest rates for deposits in several banks have been readjusted upwards recently, after a period of continuous decrease. This development has prompted concerns that banks’ lending rates may also follow suit. Báo Người Lao Động reporter spoke to Dr. Nguyen Quoc Hung, General Secretary of the Vietnam Banks Association (VNBA), about this issue.
Reporter: A number of banks have recently raised deposit interest rates for various terms from 0.1 to 0.5 percentage points. Is this a general trend in the market?
– Dr. NGUYEN QUOC HUNG: The move by some banks to raise deposit interest rates can be seen in the context of considering multiple factors, such as maintaining the attractiveness of savings channels compared to other investment channels like gold and securities. Deposit interest rates are also calculated against inflation in the first quarter of 2024. Nevertheless, while some banks have increased input interest rates, others continue to reduce them, indicating that this trend is not yet a general one.
Dr. NGUYEN QUOC HUNG
Statistics from the State Bank of Vietnam (SBV) up to the first quarter of 2024 show that deposit and new lending rates of commercial banks have decreased compared to the end of last year. According to reports from commercial banks, as of March 31, the average deposit interest rate for new transactions was 3.02% per year, down 0.5 percentage points. The average lending interest rate for new transactions was 6.5% per year, down 0.6 percentage points per year.
Do you think the pressure on the exchange rate has had an influence on VND interest rates?
– Recently, the SBV has organized continuous bidding sessions through the issuance of Treasury bills to absorb excess liquidity from the system, pushing up interbank interest rates, thereby contributing to reducing pressure on the exchange rate. The rising pressure on the exchange rate has also had a partial impact, causing deposit interest rates to increase.
Importantly, on the other hand, lending rates continue to decrease, as a series of commercial banks have continuously rolled out preferential credit packages, offering new loans with extremely low interest rates. Interest rates on existing loans are also being continuously adjusted downwards to support individual customers and businesses (enterprises).
According to the SBV’s announcement, the credit of the credit institution system to the economy only increased by about 1.93% by the end of the first quarter of 2024. Does this reflect the economy’s still low capacity to absorb capital?
– As the SBV has reported, despite actively and synchronously implementing many solutions, credit growth in early 2024 was quite low compared to recent years. One reason for this is that demand for credit capital usually increases towards the end of the year and before the Lunar New Year; the demand and absorption capacity of the economy is also low because many businesses have scaled back or suspended operations.
Banks have sufficient capital to lend, but there is a lack of qualified customers Photo: TẤN THẠNH
Credit growth is currently more positive compared to the first two months of the year, but there are still difficulties in the context of businesses in various industries not recovering strongly. Even consumer credit continues to decrease due to a decline in consumer demand caused by economic difficulties, impacting the income of individuals and households. The current demand for saving for the future is increasing, while the demand for borrowing credit from banks to expand spending is decreasing.
The story of the current market is not just about reducing interest rates because I believe that it is very difficult to further reduce deposit interest rates, while lending rates are being encouraged to continue decreasing. The banking industry has also been implementing debt restructuring and maintaining the debt group in recent times to support businesses.
Currently, to promote lending to the economy and increase businesses’ capacity to absorb capital, more solutions are needed from fiscal policy. In particular, it is necessary to support businesses in promoting trade, seeking new markets and customers, and promoting the marketing of goods and products internationally. Simply reducing lending interest rates and the efforts of the banking industry are not enough. The solutions of ministries and sectors in supporting businesses and recovering the economy need to be in sync.
Even in the real estate sector, there have been many meetings to discuss solutions to remove obstacles, but the market is still facing difficulties. The inherent difficulty does not lie in the flow of credit capital or interest rates, but in the market’s purchasing power. If there is no demand for transactions, it will be very difficult for the real estate market to recover.
In your opinion, banks currently do not lack cheap capital and are ready to lend, but the problem does not lie in the issue of interest rates?
– That’s right. Lending rates will be difficult to increase in the current context because credit growth is still not as expected, and the liquidity of the banking system remains abundant. This year, the SBV has changed its policy to grant a credit growth limit of 15% once at the beginning of the year.
Capital in banks is not lacking; the most important issue at this time is the lack of customers who meet the criteria and conditions for borrowing. Many banks are trying to find ways to lend in order to increase credit growth, but not at all costs because if they do, the risk of bad debt will increase. In other words, banks must find the right people, the right subjects, and the right customers to lend to.
Not to mention, the problem also lies in what businesses borrow for and whether they can generate profits from their production and business activities to repay the banks. Therefore, solving the credit problem requires harmonizing the solutions of all sectors – from monetary policy to fiscal policy on tax reduction, support for trade promotion, finding market outlets, and stimulating consumer demand.
Offering loans with extremely low interest rates
Currently, some banks are offering loans with interest rates as low as 4%-6% per year to businesses with effective production and business activities.
The director of a bank affirmed that the bank is ready to lend to well-performing businesses with extremely low interest rates, as low as 4.5% per year. However, well-performing businesses do not have the need to borrow capital and expand investment in production. Meanwhile, banks are hesitant to lend to inefficient businesses that do not meet the lending criteria, even if the interest rates are as high as 10%-15% per year.
