Bank deposit rates start inching up

Although deposit interest rates may inch up soon, experts say that lending rates can still continue to decrease thanks to the optimisation of capital mobilisation and bank's digitisation

Since last week, a number of banks such as Techcombank, VPBank, and ACB have raised interest rates by 0.1-0.2 per cent, while they were moving around 0.8 per cent compared to a month ago.

Techcombank has just raised multi-term deposit rates since March with the highest rate of 0.8-0.9 per cent a year, compared to the interest rate schedule at the beginning of February.

VPBank also raised short-term interest rates. Currently, the interest rate applicable to customers depositing less than VND300 million($13,040) at the counter is 3.5 per cent per year for a 3-month term, up 0.2 per cent per year against the previous level. For deposits of VND3 billion ($130,430) or more, the interest rate is 3.7 per cent per year.

The interest rate hike has not spread yet because market liquidity is still quite abundant in the context of low credit demand. However, the leading private joint-stock commercial banks to raise interest rates are placing considerable pressure on the rest while at the same time giving a warning about the coming interest rate hike trend.

Although 11 banks reduced interest rates in February, it is expected that interest rates will begin to increase in March under the multi-dimensional impacts of inflation, credit demand, and impacts from the world market. Inflation in Vietnam has not shown signs of strong increase but the CPI in February increased by 1.52 per cent, the highest February increase in eight years, is also a number to be wary of.

Bao Viet Securities JSC (BVSC) said that in the context of COVID-19 showing signs of control, vaccination is being implemented, and CPI in February increased sharply, it is likely that deposit interest rates will increase.

Many joint-stock commercial banks also said that bank deposits are growing at a much slower rate compared to the same period last year. In the short term, this situation is not worrying because the demand for credit is low. However, in the next quarter, when production and business activities gradually increase, raising deposit rates will be difficult to avoid.

Economic expert Vo Tri Thanh said that the impacts of the world market, along with the recovery of the economy will cause credit demand to increase rapidly, putting pressure on interest rates. If interest rates continue to be pinched, financial risks will exist, especially the risk of cash flows out of banks and into other investment channels.

Phan Dung Khanh, investment advisory director of Maybank KimEng Securities, also stated interest rates are currently at the bottom. If interest rates continue to fall, it will be difficult to attract residential deposits to serve the business needs of businesses when the economy recovers.

However, according to economist Dinh Trong Thinh, inflation and interest rate increase will take place slowly. “I think that this year, the US inflation will hardly exceed 2 per cent. Similarly, Vietnam's inflation is likely to remain below 4 per cent as targeted by the government. Interest rates will increase gradually from the end of March but the increase will not be too large,” said Thinh.