There remains much room for banks to cut lending interest rates. (Photo: VietnamPlus)
Hanoi (VNA) – As publicising lending interest rates is mandatory for banks and deposit interest rates are still being slashed, experts perceived that there remains room for further lending rate cuts in 2024.
Banks demanded to publicise interest rates
Pham Chi Quang, Director of the Monetary Policy Department of the State Bank of Vietnam (SBV), said that in its Directive 01 on the implementation of tasks for 2024, the central bank ordered credit institutions to publicise and take responsibility for their average lending rates as well as the difference between lending and deposit rates.
Leaders of some banks said there is no problem with publicising average interest rates for short-term loans since the differences between deposit rates and such lending rates are not big, meaning minimal impact to clients.
However, it is not easy for them to publicise interest rates for medium- and long-term loans.
A general director of a Hanoi-based joint stock commercial bank said they recently cut lending rates by 1.5 - 2%, and even by 3% for certain borrowers. The rates for medium- and long-term loans of some borrowers now stand at only 10 - 11% per year, but they still complain that deposit rates are just 6 - 7% at the maximum. Short term deposits are only 2.7%, at present and they want their lending rates to be lowered more.
If a bank publicises its average lending interest rate, existing borrowers will react and ask for further rate cuts though they have already benefited from preferential rates. This is a problem for banks, the executive said, proposing the SBV re-consider the request for publicising average lending rates.
Corporate clients hope interest rates will be reduced further so that they have more conditions to recover production and business activities. (Photo: VietnamPlus)
Other bank leaders suggested that only average lending rates for individual clients be publicised. Corporate clients have specific characteristics and interest rates for them depend on different parties, so lending rates for them vary, making it hard to have average interest rates for this group of clients.
Lending interest rates have room to go down further
Experts said that it is necessary to publicise both lending and deposit interest rates to enhance transparency and help clients compare and make choices. Lending rates now vary considerably, depending on borrowers, cost of capital, and non-performing loans. Many enterprises also complain that the rates are still too high.
The SBV said publicising average interest rates is a direction from the Prime Minister, and the banking sector must comply. This is discipline and also a basis for joint stock commercial banks to continue slashing lending rates as soon as possible.
The downward trend in deposit interest rates continues. The latest statistics from the SBV said that deposit and lending rates for new transactions at commercial banks have fallen by 0.15 - 0.25% per year compared to the end of 2023.
In February, 19 banks announced the reduction of deposit interest rates. Among them, such joint stock commercial banks as VPBank, VIB, NCB, Sacombank, Techcombank, and Viet A Bank cut the rates for the second time in a month.
At present, there are no banks that set six-month deposits at over 5% per year. For nine- to 11-month deposits, VietBank’s interest rate is at 5% per year, while others are under 5%.
Deposit interest rate cuts help banks reduce input costs, expected to drag lending interest rates along and stimulate borrowing demand.
Since the year’s beginning, Agribank has slashed deposit interest rates twice and short-term lending interest rates once. (Photo: VietnamPlus)
Experts from the SSI Research and Advisory Centre said that the SBV still has room to reduce regulatory interest rates once more. Lending rates for existing loans may drop by another 50 - 100 basis points in the first half of 2024.
SBV Deputy Governor Dao Minh Tu said regulatory interest rates remain unchanged to facilitate access to capital from the central bank at low cost to help aid the economy. Interest rates will be regulated in line with market developments, the macro-economy, inflation, and the monetary policy’s targets.
He affirmed that the SBV always encourages credit institutions to cut expenses, simplify credit granting procedures, and reduce lending interest rates to support the economy./.
