Commercial banks are expected to lower interest rates on deposits and loans in compliance with the State Bank of Vietnam's Circular 19, which took effect on October 1.
The circular, issued on September 27, amended content in Circular 13 on capital-adequacy ratios.
The major adjustment is the redefinition of deposits, which would ease the pressure on banks to mobilise funds.
Because deposits from the State Treasury are counted in the banks' mobilisation funds for lending, banks would be able to expand the number of deposits.
Commercial banks' demand deposits from the State Treasury this year were estimated at 57 trillion VND (2.94 billion USD).
That amount is considered to be sufficient to use as a cheap source of capital, and to balance the high interest rates on mobilised capital.
The circular also allows banks to use 25 percent of non-term deposits from enterprises as a source of funding for lending. It can be used because this source of non-term deposit is often stable at 20 percent to 30 percent.
Three months of loans from other credit institutions can be added to funds for lending, according to the circular.
Small banks will be able to more easily access cheap capital from larger banks, with the current interbank interest rate ranging from 8 to 9 percent.
After the circular took effect on October 1, the market showed signs of lower interest rates.
For example, Dai A Bank has eased deposit rates by 0.14 percent to 0.2 percent per year.
Customers with deposits in Vietnam dong for a one-month term and US dollars for one to two months would be entitled to get interest rates of 10.95 percent per year, and 3.75 percent per year, respectively.
Nam A Bank has announced a lending programme of up to 1 trillion VND (51.5 million USD) for small – and medium – sized enterprises'liquid capital at interest rates of 13 percent for dong and 5 percent for the US dollar.
Western Bank has lowered loan rates for small enterprises by 1 percent, and transaction fees for the first three months by 30 percent.
An Binh Bank has given priority to small enterprises by offering an annual 1 percent rate lower.
Phuong Dong Bank has cut car loan rates by 0.5 percent.
The Vietnam Banks Association (VNBA) has recently proposed that commercial banks cut down highest deposit interest rate from 11.2 percent per year to 11 percent.
VNBA has also suggested that banks slash the demand deposit interest rate from the common rate of 4.8 percent to ease business expenses, which would lower lending interest rates.
VNBA said that the deposit rate for US dollars at commercial banks, at 4.7 percent to 5.2 percent per year, is an emerging trend. The rates are currently very high in comparison to the international market.
Therefore, VNBA has urged commercial banks to reduce US-dollar deposit rates to create a balance with dong-deposit rates, creating conditions for dong interest rates to drop.
Le Tham Duong, head of the business administration department of HCM City University of Banking, said because the total outstanding loan growth had been quite low, banks were entering an output race that would lead to the fall of both deposit and loan interest rates in the near future.
Total trading volume in Vietnamese dong was 65.93 trillion VND (3.38 billion USD) during the final week last month, down 29.55 percent against the previous week, according to a report issued by the State Bank of Vietnam.
The dramatic decrease in interbank trading signals that liquidity at banks has improved after the central bank loosened capital regulations through the amendment of Circular 13 taking effect last week.
During the past two months, the trading volume hovered around 90-100 trillion VND (4.61-5.12 billion USD).
Average interbank trading increased slightly by 0.13-0.19 percent for three month loans. Interbank trading has increased on average by 6.77-8.52 percent per year. Interest rates for loans that exceed three months were down 0.06-0.48 percent to about 10.12-10.55 percent.
During the same period, total trading volume in the US dollar was also 15.37 percent to 2.52 billion USD. Interest rates for the dollar loans were about 0.33-1.43 percent per year.
As of September 27, credit growth in the banking industry was 19.27 percent. Total loan allocation for property was 218 trillion VND (11.18 billion USD), up 18 percent, loans for securities were up 19.8 percent to reach 15 trillion VND (769.23 million USD), loans for consumers increased by 19.7 percent to 151 trillion VND (7.74 billion USD).
Loans for agricultural and rural development and small and medium enterprises were up about 19-20 percent./.
The circular, issued on September 27, amended content in Circular 13 on capital-adequacy ratios.
The major adjustment is the redefinition of deposits, which would ease the pressure on banks to mobilise funds.
Because deposits from the State Treasury are counted in the banks' mobilisation funds for lending, banks would be able to expand the number of deposits.
Commercial banks' demand deposits from the State Treasury this year were estimated at 57 trillion VND (2.94 billion USD).
That amount is considered to be sufficient to use as a cheap source of capital, and to balance the high interest rates on mobilised capital.
The circular also allows banks to use 25 percent of non-term deposits from enterprises as a source of funding for lending. It can be used because this source of non-term deposit is often stable at 20 percent to 30 percent.
Three months of loans from other credit institutions can be added to funds for lending, according to the circular.
Small banks will be able to more easily access cheap capital from larger banks, with the current interbank interest rate ranging from 8 to 9 percent.
After the circular took effect on October 1, the market showed signs of lower interest rates.
For example, Dai A Bank has eased deposit rates by 0.14 percent to 0.2 percent per year.
Customers with deposits in Vietnam dong for a one-month term and US dollars for one to two months would be entitled to get interest rates of 10.95 percent per year, and 3.75 percent per year, respectively.
Nam A Bank has announced a lending programme of up to 1 trillion VND (51.5 million USD) for small – and medium – sized enterprises'liquid capital at interest rates of 13 percent for dong and 5 percent for the US dollar.
Western Bank has lowered loan rates for small enterprises by 1 percent, and transaction fees for the first three months by 30 percent.
An Binh Bank has given priority to small enterprises by offering an annual 1 percent rate lower.
Phuong Dong Bank has cut car loan rates by 0.5 percent.
The Vietnam Banks Association (VNBA) has recently proposed that commercial banks cut down highest deposit interest rate from 11.2 percent per year to 11 percent.
VNBA has also suggested that banks slash the demand deposit interest rate from the common rate of 4.8 percent to ease business expenses, which would lower lending interest rates.
VNBA said that the deposit rate for US dollars at commercial banks, at 4.7 percent to 5.2 percent per year, is an emerging trend. The rates are currently very high in comparison to the international market.
Therefore, VNBA has urged commercial banks to reduce US-dollar deposit rates to create a balance with dong-deposit rates, creating conditions for dong interest rates to drop.
Le Tham Duong, head of the business administration department of HCM City University of Banking, said because the total outstanding loan growth had been quite low, banks were entering an output race that would lead to the fall of both deposit and loan interest rates in the near future.
Total trading volume in Vietnamese dong was 65.93 trillion VND (3.38 billion USD) during the final week last month, down 29.55 percent against the previous week, according to a report issued by the State Bank of Vietnam.
The dramatic decrease in interbank trading signals that liquidity at banks has improved after the central bank loosened capital regulations through the amendment of Circular 13 taking effect last week.
During the past two months, the trading volume hovered around 90-100 trillion VND (4.61-5.12 billion USD).
Average interbank trading increased slightly by 0.13-0.19 percent for three month loans. Interbank trading has increased on average by 6.77-8.52 percent per year. Interest rates for loans that exceed three months were down 0.06-0.48 percent to about 10.12-10.55 percent.
During the same period, total trading volume in the US dollar was also 15.37 percent to 2.52 billion USD. Interest rates for the dollar loans were about 0.33-1.43 percent per year.
As of September 27, credit growth in the banking industry was 19.27 percent. Total loan allocation for property was 218 trillion VND (11.18 billion USD), up 18 percent, loans for securities were up 19.8 percent to reach 15 trillion VND (769.23 million USD), loans for consumers increased by 19.7 percent to 151 trillion VND (7.74 billion USD).
Loans for agricultural and rural development and small and medium enterprises were up about 19-20 percent./.
