Loan interest rate is twice as high as savings
In early January, savings interest rates continued to decrease from 0.1 - 0.7%/year depending on the bank. For example, LPBank reduced interest rates from 0.5 - 0.7% for terms, down to 2%/year for terms of 1-2 months; 3 months to 2.5%/year; 6 months to 3.5%; over 12 months from 5%. KienLongBank reduced interest rates by 0.2% for terms of 6 months or more, interest rates for terms of 6 - 8 months to 5%/year; 10 - 12 months to 5.3%/year; the highest mobilization interest rate is 5.9%/year for terms of 60 months... In addition, other banks such as MB, Techcombank, MSB, BaoVietBank... also reduced mobilization interest rates to quite low levels. On the savings interest rate tables of banks, the 6%/year level only appears in a few banks.
Savings interest rates drop sharply
The mobilization interest rates of banks have decreased significantly compared to a year ago, with some terms being 1-9 times lower. For non-term deposits, many banks have adjusted the interest rates down from 0.5 - 1%/year to 0.1%/year, 5-9 times lower. For 1-2 month terms, the interest rates have decreased from 5 - 6%/year to 1.9 - 4%/year; 3-5 month terms with interest rates from 5 - 6%/year are now only 2.5 - 4%/year; 6 month terms from 6 - 9.1%/year are now 3.5 - 5%/year; The common 12-month term is from 7.3 - 9.5%/year down to 4 - 5.6%/year... The average 12-month listed interest rate for customers is 4.4%/year for the group of state-owned joint-stock commercial banks and 5.3%/year for the group of joint-stock commercial banks, down 2 - 3.5% compared to the end of 2022.
Deposit interest rates are low but money is still flowing into banks. According to the State Bank of Vietnam (SBV), the amount of money deposited into the credit institution system at the end of 2023 will reach 13.5 million billion VND, an increase of 13.2%, equivalent to an increase of 1.68 million billion VND, the highest increase ever and nearly double that of 2022. In particular, large banks with high capital mobilization rates such as BIDV with capital mobilization growth of 16.5%, VietinBank reaching 13.7%, Vietcombank increasing by 12.1%.
Because the amount of money is still flowing into banks, new lending rates of banks tend to decrease to boost capital outflow. Recently, Vietcombank launched a credit package of 160,000 billion VND for individuals to borrow short-term for production and business with interest rates from 5.3 - 6.6% / year depending on the loan period from 3 - 12 months. Some banks also apply low lending rates from only 3 - 5% / year for a period of 1-3 months. For real estate loans, banks are racing to reduce lending interest rates for individual customers, lending rates in the first months are from 5.9 - 6.5% / year, floating in the following months. The average home loan interest rate of new and existing loans has also been adjusted to 9 - 10% / year, equivalent to 2021.
A survey of some customers who are borrowing shows that new loans have lower interest rates than medium and long-term loans. Ms. Pham Thanh (Tan Binh District, Ho Chi Minh City) said that the bank is calculating interest rates on old loans with a limit of VND2 billion at 9%/year. Ms. Thanh plans to switch to another bank to get a lower interest rate, from 6 - 7%/year. Meanwhile, Mr. Le Viet (Tan Phu District, Ho Chi Minh City) said that he borrowed capital for production purposes in the form of a business household. Recently, the bank announced a reduction in lending interest rates to 6.5%, lower than the 8.5% rate of 3 months ago.
According to Mr. Viet, the bank staff advised him to only borrow for a 6-month term, which would be a better interest rate than a 12-month term. "This is the lowest interest rate I have borrowed in the past 3 years. But it seems that the bank does not encourage long-term loans, so credit staff usually only advise on loan applications for 6, 9 or 12 months. However, short-term loans put more pressure on debt repayment. Since I do not borrow too much, it is still acceptable," Mr. Le Viet shared.
Mr. Nguyen Quoc Anh, Director of Duc Minh Rubber Company Limited, also informed that the new interest rate offered by banks is only 6.3%/year for short-term loans, serving production and business. Meanwhile, the company's medium-term loans still have to pay interest of 11%/year and have not been changed. Moreover, banks do not seem to offer medium- and long-term loan packages but mostly "offer new" and launch preferential programs for working capital loans of 1 year or less.
Need to reduce medium and long term loan interest rates
According to Dr. Huynh Thanh Dien, Nguyen Tat Thanh University, banks have always provided medium and long-term loans with higher interest rates than short-term loans because the longer the loan period, the higher the risk. This also shows that banks hardly encourage medium and long-term loans. In theory, businesses should only borrow capital from banks to serve short-term business activities. For example, if they buy raw materials for production in the next few months but lack capital, they will borrow from banks.
Particularly for medium- and long-term loans to purchase equipment, machinery, and expand factories, businesses must mobilize capital in the financial market. That is through issuing shares or borrowing through issuing bonds. However, the bond market has not yet recovered after violations, and issuers are slow to pay interest and principal, which discourages investors. In addition, the stock market is also hovering at a low level, and businesses are facing difficulties.
Therefore, there are very few enterprises that can mobilize long-term capital through the financial market today, only a few large, branded companies. Therefore, the vast majority of small and medium-sized enterprises, not listed on the stock exchange, depend entirely on bank capital. This is a disadvantage for Vietnamese enterprises because medium and long-term loan interest rates are high and borrowing conditions are difficult.
Dr. Huynh Thanh Dien suggested: In the context that the Government focuses on solutions to develop the economy and the State Bank has also assigned all credit growth targets for the whole year of 2024, banks should consider quickly reducing medium and long-term lending rates. Interest rates must be reduced further so that companies will be bold enough to borrow capital to invest and expand production. According to him, in the long term, the Government still has to promote solutions to regain confidence in the corporate bond market.
For the stock market, consider introducing more new products to attract investors and upgrade the market. In particular, state management agencies need to strengthen inspection and supervision of activities in the financial market in general to limit violations. When investors have confidence, they will invest in stocks and bonds, and businesses will be able to mobilize capital, reducing the use of loans from banks.
Explaining that medium- and long-term lending rates are higher than short-term rates, Mr. Pham Chi Quang, Director of the Monetary Policy Department (SBV), said that current mobilization and lending rates have decreased significantly compared to the period before the Covid-19 pandemic. Currently, up to 80% of banks' mobilized capital comes from the short term, only 20% comes from the medium and long term. Meanwhile, over 50% of outstanding credit is in the medium and long term. Banks that lend medium and long term often rely on medium and long-term mobilization rates of 12 months or 24 months plus a margin, leading to a delay in adjusting medium and long-term lending rates compared to mobilization rates.
Short-term mobilization interest rates are unlikely to decrease further, while mobilization interest rates for terms of 12 months or more can be maintained at above 5%/year, which is appropriate, because with inflation at 3%, this positive interest rate can still support banks in mobilizing capital. Lending interest rates can be further reduced because they are currently relatively high compared to mobilization.
Associate Professor, Dr. Dinh Trong Thinh
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