Credit outgrows deposits

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Credit institutions have been reported to meet the capital demand for business operation and investment purposes while maintaining sufficient liquidity.

It is worthwhile to note that the first few months of the year are not always considered as credit season, and in the past banks often moaned about negative credit growth in the first quarter. During the first three months of last year, for instance, credit dropped 1.74 per cent compared to the end of 2013. In a similar fashion, in 2013 the first quarter credit was recorded at 0.5 per cent lower compared to the end of 2012.

In addition, according to the BSH, both the deposit and lending interest rates across credit institutions tend to plunge in March. Lending rates for prioritised sectors such as agriculture, rural areas, export, SMEs, supporting industries and high-tech enterprises are standing at seven per cent a year for short-term loans and 8.5-11 per cent a year for medium and long-term loans.

To achieve the 15-17 per cent credit growth in 2015 as dictated by the State Bank of Vietnam (SBV), credit institutions are seen to boost their credit growth as soon as the first quarter of the year via the offering of preferential lending rate packages to attract both personal and corporate customers.
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Meanwhile, according to SBV data, lending activities across the banking system have been boosted relatively in the first two months of the year compared to the same period of prior years. In particular, credit has grown 0.68 per cent while total means of payment has bolstered up 2.67 per cent year-to-date.

The SBV stressed that positive credit growth was attributed to the gradual reduction in interest rates. Since the beginning of March, deposit interest rates have been applied well below the ceiling deposit rate of 5.5 per cent a year, for one to six-month term deposits. The authority is thus considering this as a motion to lower the lending interest rates further down 1-1.5 per cent a year in 2015.

At present, deposit rates are recorded at 0.8-1 per cent a year for demand deposits and time deposits under a month, while one to six-month and six to 12-month term deposits are offered at 5-5.5 per cent a year and 5.7-6.7 per cent a year, respectively. Fixed term deposits of 12 months and above are reported at 6.7-7.3 per cent a year across banks.