After raising interest rates before and immediately after Lunar New Year to attract idle money, recently many banks have reduced interest rates on deposits, mainly short-term deposits.
Specifically, VPBank has applied new deposit interest rates since 30 March which are down for many terms. Accordingly, there is an decrease of a 0.2 percentage point drop in less-than-6-month and 12-36 month terms, 0.3 percentage points for 6-7 month terms and 0.4 percentage point for 8- 11 months. This is the third consecutive decrease of VPBank in the last two months.
VIB also cut interest rates in March. Accordingly, there is a decrease of 0.3-0.5 percentage points compared to January in 1-3 month terms to 5-5.1 percent. Over-6-month terms also fell by 0.2-0.4 percentage points. Interest rates for 6-month terms are 6 percent to 6.3 percent depending on the amount of deposit.
At MB, interest rates for short terms fell by 0.1 to 0.2 percentage points compared to early February. For example, the 6-month rate dropped by 0.2 percent to 5.5 percent. At the same time, 12-month term rate remained unchanged at 7.2 percent.
For state-owned commercial banks, interest rates have fallen deeper and deeper. At VietinBank, interest rates for 6-month, 7-month and 8-month terms are now only 4.8 percent, down by 0.5 percent. However, most of the long terms remain unchanged, from 12 months to less than 36 months, saving customers still enjoy interest from 6.8 to 6.9 percent per year.
BIDV also adjusted the deposit rate framework twice last month. Accordingly, the first time is down by 0.2 percent for 1-2 month terms and the second is down by 0.1 percent for 364-day and 13-month terms. Currently, the rate for 1-2 month terms is only 4.1 percent; Interest rates for over-12 month-terms is 6.8-6.9 percent.
Liquidity is abundant, there is no pressure for mobilisation.
In general, banks tend to reduce more for less-than-12-month terms of with a typical reduction of 0.2-0.4 percent. Decreased compared to February, but compared with the end of 2017, the current saving rates in the popular term is slightly higher, about 0.1 to 0.3 percent. The difference in deposit rates between commercial joint stock banks and state commercial banks is quite large, ranging from 0.5 to 0.9 percent for less-than-12-month terms.
The fact that banks cut input rates was attributed to the abundant liquidity in the system and slower credit growth while deposit is growing well.
According to a report by the National Financial Supervisory Commission, by the end of March, the loan-to-deposit ratio was 88.2 percent, higher than the end of 2017 (87.8 percent). Stabilised liquidity is due to the fact that the State Bank increased the purchase of foreign currency and disbursed government bonds slowly.
Capital mobilised from economic organisations and individuals by end of the first quarter increased by 3 percent compared to the end of 2017, higher than the same period last year (2.6 percent). Meanwhile, credit is showing signs of slowing down, estimated to have increased by 3.5 percent in March compared to the end of 2017 (same period last year was 4.3 percent).
Thus, with the abundant liquidity and cooler lending activity, commercial banks have lowered their deposit interest rates in order to reduce the interest expense, ensuring profitability.
Not only interest rates in the primary market, interest rates in the interbank market has also fallen sharply. The average overnight rate falls by 0.47 percent compared to end of 2017 to 0.83 percentage point; one-week interest rate is 0.98 percent, 1-month interest rate is 1.73 percent (down by 0.9 percent and 1.2 percent respectively compared to end of 2017).
