Banks cut interest rates from October

The liquidity of the Vietnamese dong in the system is abundant due to the weak credit demand (Photo: VNA)

Hanoi - Many banks have cut deposit interest rates after the State Bank of Vietnam (SBV) lowered the ceiling levels of interest rates from October 1.

At Kienlongbank, rates are now only 3.55 percent per year on one-month deposits, 3.75 percent on two-month terms and 3.95 percent on three- to five-month deposits, down by 0.6 percentage points.

At Nam A Bank, the annual rate for deposits of 14 months is now 7 percent, down 10 basis points against the previous rate.

Similarly, OCB has lowered its deposit rates for tenors of one month to 3.75 percent, of three months to 3.9 percent and of six months to 5.8 percent, down 0.2 percentage points.

Customers making deposits worth less than 500 billion VND (21.5 million USD) for tenors of 12 months at OCB will receive an annual rate of 6.3 percent. The rate of the 12-month tenor for deposits worth 500 billion VND or more is 8.1 percent.

The SBV reduced a series of key policy rates, with the annual refinancing rate reduced from 4.5 percent to 4 percent and the rediscount rate cut from 3 percent to 2.5 percent.

The overnight lending rate in the interbank market was also reduced to 5 percent from 5.5 percent, while the interest rates for buying valuable papers through the open market were lowered from 3 percent to 2.5 percent.

Moreover, the highest rates for non-term deposits and savings of less than one month are now 0.2 percent per year, while the maximum annual deposit rate for savings of one month to less than six months was cut from 4.5 percent to 4 percent.

Apart from this, the highest rates for deposits of one month to less than six months at people’s credit funds and micro credit institutions dropped to 4.5 percent per year.

According to a report released recently, Saigon Securities Incorporation (SSI) said banks were experiencing abundant liquidity and the Vietnamese dong in the system was excessive due to the weak credit demand.

SSI cited data from the General Statistical Office (GSO) showing that as of September 22, the mobilised capital in the banking system increased by 7.7 percent, while credit growth was only 5.12 percent compared to the beginning of the year, much lower than the 8.79 percent recorded in the same period last year.

According to SSI’s statistics, the VND deposit rates have sharply fallen from May until now by a total of 1.2 - 2.5 percentage points across all terms. The rates for terms from one to less than six months at some banks are particularly low at 2.2 - 2.5 percent per annum.

SSI said the main factor affecting deposit rates in the near future was still credit demand, and it maintained its forecast that the deposit rates would fall further by 0.1 - 0.3 percentage point in the fourth quarter of 2020.