Interest rates may continue to decline in early months of 2021

11-Dec-2020 Intellasia | TTXVN | 7:09 AM Print This Post

Year 2021 is unpredictable. However, the downward trend of interest rates is likely to continue in the first months of the year.

In the last months of 2020, many commercial banks have further adjusted both savings and lending interest rates. This is a positive signal, creating favourable conditions for the recovery of the economy after negative impacts of the Covid-19 pandemic from the beginning of the year until now.

Accordingly, the highest savings interest rate level in banks is popular at 6.5 7.1 percent per annum for savings terms from 12 months or more. Particularly, some banks still list the highest rate above eight percent per annum, along with some conditions.

Vietnam Export Import Commercial Joint Stock Bank (Eximbank) is currently offering the highest savings interest rate of 8.4 percent per annum, followed by Orient Commercial Joint Stock Bank(OCB) with 8.2 percent per annum. However, this interest rate level is only applicable to deposits from 500 billion dong or more, on terms of 13 or 24 months.

Maritime Commercial Joint Stock Bank (MSB) and Lien Viet Post Commercial Joint Stock Bank (LienVietPostBank) respectively list their highest savings rates at eight and 7.9 percent per annum for deposits from respectively 200 and 300 billion dong or more, on terms of 12 or 13 months.

Among the 20 surveyed banks, Vietnam Prosperity Commercial Joint Stock Bank (VPBank) are applying the lowest savings rate in the system with 5.5 percent per annum for deposits from 50 billion dong or more on terms of 24 and 36 months.

Among the four large banks, savings interest rates slightly declined by 0.1 0.2 percent per annum depending on each term compared to the beginning of last month. Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV), Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank) and Commercial Joint Stock Bank for Agriculture and Rural Development of Vietnam (Agribank) all list the highest rates at 5.6 percent per annum, slightly down by 0.2 percent over the previous time, applicable to terms from 12 months or more.

Despite cutting savings rate by 0.1 percent per annum compared to early November, the highest savings rate at Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank) is slightly higher at 5.8 percent per annum for term of 12 months. Customers depositing capital on terms of less than 12 months are offered the highest rate of only four percent per annum.

It can be seen that the highest interest rates offered by banks are no longer for long terms of over 36 months as before, they now focus mainly on terms from 12 to 24 months. Some banks even cut the 36-month savings rate below the 24-month rate.

This movement seems contrary to the previous time when banks encouraged people to deposit capital on long terms to maintain stable capital flows.

According to economic experts, the liquidity of banks is currently fairly abundant. Particular, since many banks focused on mobilising long-term capital to meet the requirement on the ratio of using short-term funds for medium and long-term loans of the State Bank of Vietnam (SBV), the needs for long-term capital has more or less decreased, and interest rates thus tend to go down slightly or go sideways.

Although the savings rates have continuously gone down, lending interest rates at banks are not cur accordingly. According to leader of a bank, many banks currently still have a large amount of long-term capital mobilised at high interest rates of about seven to eight percent per annum, or even higher. Therefore, the input costs are still high, making it impossible for banks to immediately make significant reduction in lending rates.

Even when the lending rates decline, it is not easy for banks to find suitable customers. deputy general director of OCB Dao Minh Anh said that this is not only the difficulty of OCB alone, but all banks have encountered. It is because preferential loan packages must have certain standards. Cutting interest rates but the credit quality cannot decline, so if customers cannot meet the requirements, banks cannot disburse capital.

The latest report on the banking activities of the SBV, the dong lending rate level of organisations tend to fall compared to the end of 2019. The maximum short-term lending rate in dong for some industries is currently 4.5 percent per annum. Meanwhile the US dollar lending rates are raging from three to six percent per annum, in which the short-term lending rates are from three to 4.5 percent per annum, and long-term lending rates are from 4.2 percent to six percent per annum.

Talking about the interest rate trend in the near future, Dao Minh Anh said that interest rates will continue to fall from now until the end of the year, and also in 2021. The credit growth in the last nine months of 2020 was only six percent, but it has gradually increased again in the fourth quarter, expected to reach about 10 percent by the end of the year, mainly focusing on the last quarter.

“Although the Covid-19 pandemic is being well controlled and Vietnamese businesses have not been hit too much compared to other countries, but the international trade has been and will continue to be affected, so year 2021 will be a very difficult year for businesses, individuals as well as banks. This is the time for banks to stand side by side with businesses, provide financial solutions and support businesses to appropriately restructure,” said Minh Anh.

Director of corporate customers of a bank talked to reporter that banks themselves are also businesses, they must calculate the business to ensure capital safety and the interests of shareholders.

Normally, when the savings rates are lowered by 0.1 0.2 percent per annum, lending rates will also be cut correspondingly for both new and existing customers. Year 2021 is an unpredictable year, but the downtrend of interest rates is likely to continue in the first months of the year.


Category: Finance, Vietnam

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