19-6-2023 (HANOI) Following recent policy rate cuts by the central bank to stimulate the economy, Vietnamese banks have continued to reduce interest rates on dong deposits, according to a report by Vietnam News Agency.
The country’s four largest banks, including the state-owned Agribank and three partially privatized banks – Vietcombank, BIDV, and Vietinbank – have decreased deposit rates by 0.5 percentage point on dong deposits with varying maturities.
Leading bank Agribank announced a reduction of 0.5 percentage point to 6.3 percent per year on its one-year dong deposits, down from the previous rate of 6.8 percent. The bank also adjusted its six-month deposits to 5 percent.
Vietcombank, VietinBank, and BIDV now offer the highest interest rate of 6.8 percent per year on dong deposits ranging from one year to five years.
Following the footsteps of major banks, smaller lenders have also implemented rate cuts of 0.5 percentage point on six-month and one-year deposits.
Bankers explained that Vietnamese banks are lowering dong deposit rates to reduce borrowing costs and encourage lending activities.
The State Bank of Vietnam, the country’s central bank, stated that lower interest rates on short-term dong deposits would allow banks to further reduce lending rates. This aligns with the government’s efforts to provide households and businesses with access to low-cost credit, thereby preventing an economic slowdown.
Data from the central bank indicates that credit growth in the banking system during the first five months of this year increased by 3.17 percent compared to the end of last year. However, this growth rate is lower than the approximately 8 percent recorded during the same period last year.
The central bank’s Forecasting and Statistics Department predicts a 4 percent year-on-year growth in total outstanding loans for the second quarter, with a projected expansion of 13 percent for the entire year. This growth expectation is slightly below the earlier target of 14-15 percent credit growth for this year.
To address the economic situation, the central bank has already reduced policy interest rates multiple times this year and further lowered the cap on interest rates that commercial banks can offer on dong deposits ranging from one month to six months.
The central bank remains cautious regarding global inflation and the potential pressure on interest rates as major economies continue to pursue monetary tightening measures.
