The Prime Minister has recently issued Official Dispatch No. 122/CD-TTg to the Governor of the State Bank of Vietnam (SBV) regarding enhanced measures for credit management in 2024. The dispatch emphasizes the need to focus on reducing lending rates by cutting costs, simplifying administrative procedures, and embracing digital transformation and digitalization.
No intense competition in deposit rates expected
Following the Prime Minister’s dispatch, the SBV issued Document No. 9774, instructing credit institutions and SBV branches in provinces and cities to stabilize deposit rates and reduce lending rates. Credit institutions are also urged to decisively and effectively simplify loan procedures, enhance the application of information technology, and promote digitalization in the loan process.
In the market, according to reporters from NLD, the trend of increasing deposit rates continued in November 2024, but the increase was not significant.
SeABank is the latest bank to adjust its deposit interest rates, with a notable increase in some tenors. For deposits with a tenor of 1-2 months, the interest rate is 3.4%/year, while for 3-5 months, it is 4.1%/year. The highest interest rate offered by the bank is 5.45% for a tenor of 18 months.
In the last months of 2024, there is unlikely to be a race to increase deposit interest rates. Photo: TAN THANH
Currently, several commercial banks offer deposit rates above 6%/year.
Mr. Truong Dac Nguyen, Head of Analysis at WiGroup Data Solutions Company, explained that at the end of the year, businesses tend to ramp up production and business activities, leading to an increased demand for capital. This, in turn, prompts banks to compete for capital by offering higher deposit rates.
“This is not a unique phenomenon to this year but has been observed in previous years as well. It highlights the seasonal nature of the banking industry. Nonetheless, interest rates remain low, and this adjustment is not expected to last long or reverse the overall trend,” Mr. Nguyen added.
Economist Dr. Dinh The Hien shared that the deposit interest rates in the past have been reasonable, settling at around 4.5-5%/year. This makes it a safe investment option with a positive real interest rate when compared to inflation. He noted that the recent increase in deposit rates is mainly observed in some medium and small-sized banks and could be attributed to their specific capital needs rather than a market-wide trend.
“Therefore, we are unlikely to see an intense competition in raising deposit rates, especially after the government and the SBV’s intervention to maintain low-interest rates, given the current low inflationary environment,” Dr. Dinh The Hien stated.
Market needs an injection of VND670 trillion
According to SBV statistics, the total credit balance of the system at the end of September 2024 reached VND14.7 million billion, far exceeding the total mobilized capital of VND14.5 million billion. This development has put pressure on liquidity, forcing major banks to adjust their interest rate policies to meet the economy’s growing capital needs.
As of the end of October 2024, the credit growth of the banking system to the economy was over 10.08%. If calculated based on the total credit balance of over VND14.561 million billion as of the end of August 2024, an additional injection of approximately VND670 trillion is needed in the last two months of the year to achieve the targeted credit growth rate of 15%.
Amid the ample lending limit, the Bank for Investment and Development of Vietnam (BIDV) continues to promote the implementation of credit packages with a total scale of over VND19 trillion.
Specifically, BIDV offers VND3,000 billion and USD50 million in preferential loans for textile and garment enterprises with new investment projects or projects to renovate workshops, machinery, and equipment towards energy efficiency, environmental protection, or export orders that meet the green criteria of markets such as Europe, the US, and Japan.
For enterprises investing in clean water projects, BIDV provides VND5,000 billion in loans and commits to reducing the interest rate by up to 1.5 percentage points compared to the bank’s floor lending rate.
Lending rates to be competitive
According to a leader of VietinBank, since the beginning of November 2024, the strong implementation of public investment projects has increased the capital demand of enterprises involved in these projects. As a result, they are less concerned about borrowing costs as lending rates have already hit rock bottom.
However, banks can still reduce lending rates for efficient businesses. Currently, as the credit limit has not been fully utilized, banks are eager to increase outstanding loans, leading to intense competition.
Commenting on this, Dr. Dinh The Hien said that there is fierce competition among banks to attract customers, especially good customers. Therefore, there is unlikely to be a simultaneous increase in lending rates at the end of the year.
“Many enterprises are in good health and have stable operations, borrowing at an interest rate of only 7%/year. In contrast, businesses with less favorable conditions will face much higher borrowing costs. This competitive landscape requires borrowers to meet certain conditions and not solely rely on pressure on banks to reduce interest rates,” Dr. Hien analyzed.
The director of an agricultural product trading company in the Mekong Delta shared that he has never seen such low lending rates for the agricultural export sector. However, his company is still considering whether to borrow as they fear it may not be effective, choosing instead to “lie low” to preserve capital. He added that his company has a good credit history, so they can borrow VND in the short term at an interest rate of only 2.7%/year and USD at 3.2%/year. “We have never been so well taken care of by banks as they are now trying to meet their year-end credit targets. Businesses that complain about difficulties in borrowing may have issues with collateral or high-risk loans,” the director said.
Banks are making profits
Currently, at the Agricultural and Rural Development Bank of Vietnam (Agribank), the average deposit interest rate is 3.64%/year, and when taking into account related costs, the average capital mobilization cost is 5.12%/year. In contrast, the average lending interest rate is 6.8%/year, resulting in a relatively low spread of 1.68%/year.
Similarly, at Asia Commercial Joint Stock Bank (ACB), the average lending interest rate is 6.67%/year, with a spread of 2.56%/year, translating to an average deposit interest rate of 4.11%/year.
A senior leader of VietinBank shared that except for Agribank, a 100% state-owned bank, commercial banks with a spread of 2% or higher are already profitable.
Mr. Lam Ngoc Tuan, Director of Tuan Ngoc Agricultural Cooperative (Ho Chi Minh City):
Need for loan extension and further interest rate reduction
Tuan Ngoc Agricultural Cooperative is currently borrowing commercially at an interest rate of 10% and using the assets of its members as collateral. The cooperative has a need to build additional post-harvest processing and preservation facilities but cannot access capital due to a lack of collateral. As a result, the cooperative can only “survive” and cannot develop further.
Although the cooperative has access to preferential loans from the Farmer Support Fund under the Ho Chi Minh City Farmers Association, the amount is insufficient for their needs.
After the COVID-19 pandemic, cooperatives in Ho Chi Minh City have faced difficulties and desperately need extended support for recovery, such as loan extensions and reduced interest rates.
Mr. Lu Nguyen Xuan Vu, Chairman of Saigon Entrepreneurs Club, General Director of Xuan Nguyen Group Joint Stock Company:
Constant need for additional capital
The fourth quarter is the time when enterprises have a high demand for purchasing goods, along with salary and bonus payments and other settlements. Therefore, most enterprises, especially small and medium-sized enterprises and private enterprises, need additional capital.
Recently, many banks have proactively reduced interest rates and offered attractive loan packages to enterprises, albeit with caution. The general lending rate for working capital loans is 6-8%, which is already a reduction compared to previous levels. However, with the current slow economic growth, enterprises find it challenging to predict market demand, leading to a conservative attitude towards investment. Enterprises fear inventory accumulation and insufficient cash flow to repay bank loans.
Ngoc Anh – Thanh Nhan recorded
