Lower interest rates are gradually absorbed into the economy. (Photo: VietnamPlus)
Hanoi (VNA) – Deposit interest rates normally increase as a year nears its end to attract idle money to provide loans for people and businesses. This year is an exception when deposit rates at most banks are kept low, and some credit institutions are still decreasing these rates, even to a lower level than the pre-pandemic period.
As a result, lending interest rates have also been cut by 1-3% from last year.
Experts hope that with such attractive lending rates, capital will flow into businesses to aid economic recovery.
Interest rates fall quickly
Credit growth was estimated at 6.1-6.2% as of the end of September compared to the end of 2022. Outstanding loans in the economy totalled about 12.63 quadrillion VND (516.8 million USD).
The pace was slower than in the same period last year but has increased over months since the year’s beginning.
Ly Hiep, a resident in Hamlet 8 of Hoa An commune of Phung Hiep district, Hau Giang province, said he is borrowing 9 billion VND from Vietinbank for six months at a preferential interest rate of 5.5% per annum. The rate has dropped 2.5-3% compared to the end of 2022.
Farming fish on over 40,000 sq.m of water surface, he has to spend around 110-120 million VND on feed every day. Uninterrupted bank loans with reasonable interest rates over the last 10 years have helped ease the financial burden.
Hiep said loans with an interest rate of 5.5% per year are useful for farmers like him under current conditions in the economy.
Likewise, Nguyen Minh Nhat, Director of the Hoang Minh Nhat Joint Stock Company in Can Tho city, said his firm posts about 1 trillion VND in annual revenue and now has 170 billion VND in outstanding loans from Vietcombank. The initial lending interest rate was 6.5% per year, but the bank has announced rate cuts thrice since the start of 2023, by 0.5 percentage point per year each time.
However, many businesses still hope that lending rates will be reduced further, especially for the loans for machinery procurement.
Tran Phuoc Hung, Director of the Can Tho-based Phuoc Hung Food Company, said his company borrowed 45 billion VND to fund rice purchase, processing, and export. The lending rate was brought down from 9.5% per year at the beginning of the year to 8% and then 6.5% per year on September 8. However, this rate is applied to just short-term loans – five months.
Rice bags at the warehouse of the Phuoc Hung company (Photo: VietnamPlus)
Meanwhile, lending interest rates for long-term loans are still very high, up to 9-9.5% per annum, he pointed out, voicing his hope that they will be lowered to around 7% per year so that the company can expand production and business activities.
Positive signs for year-end credit growth
Phan Thanh Son, Deputy General Director of Techcombank, held that interest rates are not the main cause of slow credit growth, but it is a risk from the business environment and other factors that has affected the making of investment decisions.
Since the start of 2023, Techcombank has slashed interest rates for both new and existing clients four times, covering total outstanding loans of 21 trillion VND.
He expected that the monetary and fiscal policies will stimulate credit demand and support economic growth in the remaining months.
Techcombank is striving to reach the credit growth target set by the State Bank of Vietnam. (Photo: VietnamPlus)
Experts forecast interest rates will drop by about half a percentage point from now to year’s end. Deposit interest rates will decrease at a slower pace than lending interest rates since they have continuously been slashed almost to their lowest level.
Financial expert Nguyen Tri Hieu said the financial market is trending higher and will last until the year’s end as deposit rates go down.
Thanks to an array of support policies, credit growth has improved but remains relatively slow due to the economy’s limited absorption capacity. However, the lending rates are unlikely to decline sharply in accordance with deposit rate cuts because the safety of the banking system still needs to be guaranteed, he emphasised.
Nguyen Thi Hong, Governor of the State Bank of Vietnam, noted though credit has increased by just 5.91%, production, business recovery, and credit growth are usually high toward year-end. Thus, credit use should continue to increase in the short term.
Some preferential credit packages are in play, such as the one worth 15 trillion VND for the fisheries sector, and the 120 trillion VND package for developers and buyers of social housing for factory workers.
If the National Assembly approves the Law on Real Estate Trading and the Housing Law during the October session, businesses will be allowed to buy houses for employees. As a result, demand for loans from the 120 trillion VND package may increase, Hong added./.
