Why do lending interest rates decrease more slowly than deposit interest rates?

ANTD.VN - The State Bank believes that currently, banks are mobilizing over 80% of short-term capital, while 50% of outstanding loans are medium and long-term, with long adjustment periods, so there is a delay.

Interest rates fall to 20-year low

According to the Standing Deputy Governor of the State Bank of Vietnam (SBV) Dao Minh Tu, in 2023, the SBV adjusted the operating interest rates down four times, with a reduction of 0.5-2.0%/year in the context of world interest rates continuing to increase and anchor at high levels, creating conditions to reduce the lending interest rate level of the market; credit institutions were also directed to reduce costs and synchronously apply measures to reduce the lending interest rate level. To date, the deposit and new lending interest rates of commercial banks have decreased by about more than 2.0%/year compared to the end of 2022.

Deputy Governor, at the beginning of 2023, interest rates were a very fierce issue, but by the second half of the year, commercial banks were very aware of the issue of reducing interest rates to support businesses and people. Therefore, up to now, the average lending interest rate has dropped very low.

"It can be said that, up to this point, lending interest rates are at a very low level, including short-term, medium-term and long-term, including priority and non-priority sectors. The general interest rate level has decreased as assessed by the press and we also find it reasonable to be at the lowest level in the past 20 years and many commercial banks say that interest rates cannot be lower.

Currently, the remaining high interest rates are from previous terms when commercial banks mobilized at high interest rates. But certainly, by 2024, this level will no longer be maintained," Mr. Tu emphasized.

High interest rates will no longer be maintained in 2024

Sharing more, Mr. Pham Chi Quang - Director of Monetary Policy Department (SBV) said that overnight interest rates between banks are currently very low at 0.2 - 0.5%, creating very good conditions for credit institutions to have room to lend at low interest rates.

"The average deposit interest rate of commercial banks for newly-arising transactions is 3.9%/year, the average lending interest rate for newly-arising transactions is 6.7%/year, down over 2% compared to the end of 2022. Therefore, deposit and lending interest rates at banks at present are much lower than before the Covid-19 pandemic," said Mr. Quang.

Explaining the situation of lending interest rates decreasing slower than deposit interest rates, Mr. Pham Chi Quang said that in the balance sheet structure, 80% of commercial banks' capital sources currently come from short-term and 20% from medium and long-term; meanwhile, over 50% of outstanding credit is medium and long-term loans.

Although interest rates have decreased rapidly, the State Bank of Vietnam has admitted that lending rates have decreased more slowly than deposit rates. According to Mr. Pham Chi Quang, the reason is the delay, as up to 50% of outstanding credit at banks is medium and long-term loans.

“Up to 80% of the capital mobilized by commercial banks currently comes from short-term, only 20% comes from medium and long-term. Meanwhile, over 50% of outstanding credit is in medium and long-term.

Banks that lend medium and long term often rely on 12-month or 24-month medium and long-term deposit interest rates plus a margin, leading to a delay in adjusting medium and long-term loan interest rates compared to deposit interest rates,” Mr. Quang explained.

More drastic capital injection into the economy

Regarding the credit growth limit, another point is that this year the State Bank has assigned the entire 15% growth limit to banks, instead of dividing it into many stages and requiring banks to submit proposals before considering room expansion like every year.

According to Deputy Governor Dao Minh Tu, the new credit limit is a step to change the organizational and management mechanism, sending a message to banks that capital injected into the economy this year must be stronger, more drastic and more responsible.

"If in previous years we considered them as grants and allocations, now it is a mechanism for banks to strive to achieve their targets. Because last year, there were banks that increased their room to the maximum, but many banks did not reach the room, and some banks even had negative credit growth. Those banks with negative growth or low growth may have not been bold enough to grow. Therefore, the change is for these banks to strive to achieve the assigned credit targets," said the Deputy Governor.

Although the entire limit was granted at the beginning of the year, Mr. Tu said that if any bank runs out of limit, the State Bank will still consider continuing to increase it, but the condition is that the economy must allow credit expansion and still ensure macroeconomic safety and ensure credit capital goes to the right subjects.

"Growth can even be 16% if the economy and businesses need credit," Mr. Dao Minh Tu affirmed.

Source link: https://www.anninhthudo.vn/vi-sao-lai-suat-cho-vay-giam-cham-hon-lai-suat-huy-dong-post563265.antd