Difference in interest rates cause difficulties for joint stock banks

After the State Bank of Vietnam (SBV) reduced key interest rates and the compulsory reserve interest rate, commercial banks have continuously adjusted their deposit and lending interest rates. Currently, lending interest rates of some state-owned banks have already dropped to the lowest rate of 10% a year while lending interest rates at commercial joint stock banks remain at 3% a year, higher than that of the state-owned banks. However, earlier, lending interest rates of commercial joint stock banks were always more attractive than those of the state-owned banks.
Currently, although desiring to increase loans, commercial joint stock banks also find it hard to further cut lending interest rates. Representatives of some banks said that lending interest rates of state-owned banks are putting commercial joint stock banks into difficult situations. Because lending interest rates of state-owned banks have already reduced too deeply, and commercial joint stock banks find hard to catch up with state-owned banks.

According to the statistics from SBV, for state-owned banks, the lowest interest rate for dong deposits is now 0.83% a month or 10% a year, the most common rate is 1.08-1.17% a month or 13-14% a year, and the highest rate is 1.25% a month or 15% a year, lowest in 2008. Meanwhile, lending interest rates of commercial joint stock banks are higher. Namely, at Viet A Bank, the lowest interest rate is 1.13% a month or 13.5% a year; the highest rate is 15% a year. At Lien Viet Bank, the lowest rate is 1.08% a month or 13% a year and the highest rate is 15% a year. At An Binh Bank, the lowest rate is 1.15% a month or 13.75% a year and the highest is 15% a year.

A representative from a Hanoi-based commercial joint stock bank said that although there have not been any specific statistics, the difference in lending interest rates has made a number of clients, switch to borrow loans from state-owned banks. However, commercial joint stock banks cannot lower the average lending interest rate to 10% a year the same as state-owned banks. “We would rather not lend to clients than suffer from losses,” said a representative.

Earlier, when the banks were increasing the deposit interest rates, state owned banks could not match the deposit rates of commercial joint stock banks. However, state-owned banks can take more initiatives now that the central bank has-increased key interest rates.

Additionally, the above representative said that even when deposit interest rates of state-owned banks were pushed high early this year, they still have more advantages because they have cheaper sources of deposits.

A representative from another commercial joint stock bank said that lending interest rates of commercial joint stock banks remain 13-15% a year that are hard to be further lowered because the basic interest rate has reduced already and many previous loans with high interest rates have not yet become due.

It is reported that previous deposits with high interest rates failed to be disbursed to credit loans but were used to invest into other fields such as government bonds because of high liquidity and relatively attractive interest rates.

Some commercial joint stock banks said that not until the end of the first quarter and if the central bank still keeps the current basic interest rate unchanged, will they dare to reduce lending interest rates in order to catch up with the state-owned banks. However if the basic interest rate continues to be reduced, there will be a larger gap between lending interest rates of state-owned banks and commercial joint stock banks.

 

Category: Finance