Deposit interest rates continue to increase

In May 2022 alone, there were banks that increased interest rates twice. This move of banks has partly sucked the idle cash flow back.

Deposits in banks have shown signs of increasing again in recent months. (Illustration image – Photo: Investment Newspaper)

In the last week of May, Vietnam Technological and Commercial Joint Stock Bank (Techcombank), used to be a bank with a high level of deposit interest rate lowest in the system, has adjusted to increase interest rates at many maturities. The highest interest rate for deposits at Techcombank’s counters increased by 0.3%/year to 6.3%/year for priority customers when depositing with a 36-month term. For online deposits, the highest interest rate of the same term is up to 6.5%/year.

For regular customers, Techcombank applies the highest interest rate from 5.85-5.95%/year for a term of 36 months, an increase of 0.45%/year compared to before if deposited at the counter. As for online deposits, the 36-month term interest rate is 6.3%/year.

Not only Techcombank, Vietnam Prosperity Commercial Joint Stock Bank (VPBank) has announced an increase in deposit interest rate by 0.3%/year with many terms. Accordingly, for deposits of less than 300 million dong, VPBank’s 36-month term deposit interest rate increased from 6.1%/year to 6.4%/year; 24 month term, increased from 6%/year to 6.3%/year; 13-month term increased from 5.9%/year to 6.2%/year…

Notably, this is the second interest rate increase of this bank since the beginning of May. At the previous increase, the term was adjusted up to 0.8%/year.

Also one of the banks that recently increased deposit interest rates, Kien Long Commercial Joint Stock Bank (KienlongBank) has adjusted interest rates for a number of terms for corporate and individual customers by up to 0.4%/ years from the previous level. After adjustment, individual and corporate customers of Kienlongbank can receive maximum interest rates up to 6.75%/year and 6.4%/year, respectively.

Previously, Saigon – Hanoi Commercial Joint Stock Bank (SHB) announced to offer up to 1.1%/year interest rate for savings customers. Currently, the highest interest rate applied at SHB is 7.4%/year for certificates of deposit with a term of 8 years and 7.2%/year for a term of 6 years.

Except for the “big 4” group, which includes Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), Joint Stock Commercial Bank for Industry and Trade of Vietnam (VietinBank) and Bank for Agriculture and Development. For rural development (Agribank), deposit interest rates of banks have increased significantly in recent months with an increase ranging from 0.1 to 0.4% per year. If compared to the same period last year, the deposit interest rate has increased by 0.5 – 1%/year.

According to a leader of a commercial bank, deposit and lending interest rates in 2022 are under pressure from both domestic and foreign factors. This is the reason deposit interest rates have been inching up continuously for the past several months.

This leader also said that, although deposit interest rates increase, short-term lending rates will basically remain stable at low levels to support businesses to recover and develop after the pandemic. In the long term, lending interest rates may fluctuate in line with the supply and demand of the economy.

According to Economist Associate Prof. Dr. Dinh Trong Thinh, over the past 2 years, deposit interest rates have continuously decreased to create conditions for reducing lending rates to support the economy to overcome the epidemic. Therefore, there is no room to continue lowering deposit rates. Meanwhile, from the beginning of the year until now, credit has grown very strongly. If banks do not raise deposit rates, liquidity will be very tight and cannot meet enough capital for loans to restore production and business.

“The increase in deposit interest rates is inevitable to attract cash flow from investment channels back to banks and it is forecasted that this interest rate will continue to increase in the coming time. But I expect the increase will not be too large, ranges from 0.5-1%/year”, Mr. Thinh said.

In fact, deposits in banks have shown signs of increasing again in recent months. Updated from the State Bank of Vietnam by the end of March 2022, the customer’s deposit balance at the end of March 2022 reached more than 11.33 million billion VND, an increase of more than 390,000 billion VND compared to the end of 2021, equivalent to an increase of 3 ,6%.

Forecasting interest rate trends, Dr. Can Van Luc, Chief Economist of BIDV, said that deposit interest rates will gradually increase throughout 2022 as other investment channels such as real estate, securities… quite attractive. Meanwhile, lending interest rates will continue to remain at the current low level and may increase slightly in the second half of 2022.

Recently, the Government and the State Bank of Vietnam have issued many policies to support interest rates for businesses to contribute to stabilizing the macro economy, controlling inflation, and actively supporting the economic recovery process. In which, the program to support the interest rate of 2%/year from the state budget is VND 40,000 billion according to Decree 31/2022/ND-CP on interest rate support from the state budget for loans of businesses, Cooperatives and business households are receiving special attention. Borrowers will receive a direct interest rate reduction from the interest payment period from May 20, 2022 to the end of 2023 or until the limit of the VND 40,000 billion support package expires.

The demand for capital to recover production and business increased sharply, but many banks have almost run out of credit room. Regarding this issue, Deputy Governor Dao Minh Tu said that the State Bank of Vietnam is targeting credit growth at 14% this year. The implementation of 2% interest rate support will probably increase credit demand in the near future, thereby increasing the amount of credit needed to supply the economy. However, the increase in credit balance needs to ensure inflation targets and macro stability.

“The State Bank will study and calculate how to add credit to the economy in the most appropriate way, both to meet the requirements of economic recovery, and to allow the 2% interest rate support package to be effective. enough room for the fastest and most effective deployment”, the Deputy Governor affirmed.

According to the State Bank of Vietnam, as of May 27, the total credit of the economy increased by 7.75% compared to the end of 2021 and more than doubled over the same period last year.

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