Will loan rates be reversed?

>> Keeping loan rates low is tough

Deposit rates are rising

Since the second half of April 2024, several commercial banks' deposit rates have risen by 0.2% to 0.3% above March. This trend continued in early May, when some banks increased deposit rates by 0.8% for six months or longer.

ACB has just announced new deposit rates, which are up by 0.2% over the terms of one to three months. This bank increased deposit rates for less than VND 200 million by 2.5%, 2.7%, and 2.9% for the terms of one to three months.

Similarly, Bac A Bank has raised its deposit rates on several terms. As a result, for deposits of less than VND 1 billion, the interest rate for one- to three-month terms rose by 0.15% every year. The 12- to 13-month deposit rates rose by 0.25% to 4.85% per year...

According to bank experts, it's also logical that banks are hiking deposit rates because a tiny percentage of people's saving accounts have been removed over time. Indeed, according to the GSO, credit institutions' capital mobilization (including residential and institutional) has fallen by 0.76% since the beginning of the year as of March 25th.

Furthermore, due to exchange-rate pressure in the first few months of the year, the State Bank of Vietnam (SBV) was forced to interfere in the foreign currency market by raising the supply of foreign currencies and issuing T-Bills to absorb liquidity.

Meanwhile, loan growth is showing promising signals and is expected to improve in the last months of the year, forcing banks to raise capital in response.

>> Loan rates could be cut by an additional 1.25–2%

Loan rates make it hard to rise

Rising deposit rates have raised concerns about the rise in lending rates. However, many financial experts believe the former will have little influence on the latter.

Firstly, the number of banks upping their deposit rates is small, and the rise is not significant. Currently, the maximum 12-month deposit rates are only 5.3 percent per year, significantly lower than a year ago.

SBV injected significant amounts of money through OMO, including VND 36 trillion on Arpil 23, 2024 and VND 25 trillion every day on April 24 and 25, 2024. The SBV's action prevented commercial banks from raising deposit rates.

More significantly, credit growth is currently relatively slow, thus raising lending rates will make credit growth difficult to achieve the SBV's targets.

"With credit demand as poor as it is now, the economy's capital absorption is low, so most banks will not hike lending rates until the end of 2024," said one bank analyst.

At the Vietnam Economic Forum 2024, Mr. Đào Minh Tú, Deputy Governor of the SBV, confirmed that the SBV will not raise policy rates and urge credit institutions to lower lending rates, particularly for priority industries.