As banks raise interest rates on deposits, loans are expected to become more expensive

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VIETNAM, July 18 –

Compiled by Thiên Lý

For more than two years, Techcombank has kept its interest rates on deposits at low levels, even lower than the rates offered by public lenders like Vietcombank, Vietinbank and Agribank.

But at the end of May, he decided to grant them significant increases of 0.1 to 0.85 percentage points.

Similarly, VIB raised its interest rates on savings by 0.5 to 0.8 percentage points. For terms of 6 to 11 months, the rate is up 0.4 percentage points. For 13-month maturities, it increased by 0.3 percentage point.

Market watchers said the big banks, which previously kept deposit interest rates very low, have recently adjusted their rates to improve their competitiveness in attracting deposits.

They include SHB, OCB, Bản Việt, Sacombank, SCB and Kiến Long, all of which have raised their rates sharply.

Banking industry insiders said rate hikes of another 0.3 to 0.5 percentage points are likely in the rest of the year.

Trần Đức Anh, director of macroeconomics and market strategy division of KBSV Securities Company, said major banks would raise long-term deposit interest rates by about 0.5 percentage points.

Analysts at Saigon Securities Incorporation (SSI) said deposit interest rates are coming under increasing pressure in the wake of stronger-than-expected credit growth and rising inflation.

Banking expert Nguyễn Trí Hiếu agrees with analysts, saying interest rates on savings are unlikely to remain at these historic lows in the remaining months of this year, as they were l last year due to higher demand and inflationary pressures as well as fiercer competition for idle capital. other investment channels such as real estate and securities.

Data from the State Bank of Việt Nam shows total credit supply as of June 30 exceeded VNĐ 11.4 quadrillion, up 9.35% from the end of 2021 and 6.47% from compared to the same period last year.

Due to this strong credit growth, many banks have already almost exhausted the credit quotas granted to them by the SBV for the entire year.

SSI also said credit growth rates were at all-time highs at state-owned banks (up 6.4% for the year), a positive sign for economic recovery.

Apart from the high credit growth rate, analysts also believe that rising inflationary pressure is another important reason for the rise in interest rates on deposits.

They said that some important indicators like Producer Price Index (PPI) and Commodity Price Index (RMPI) are increasing day by day.

Analysts have also raised concerns about imported inflation risks as Việt Nam’s economy is very open to the world.

They said that whenever world prices rise, Vietnamese companies immediately pay a high price, as domestic production still relies heavily on imported raw materials and equipment.

Meanwhile, the global situation is complicated with high inflation, as many countries have injected money to stimulate their economy after COVID-19, due to supply chain disruptions and the Ukraine-Russia conflict. .

All of this has pushed global commodity prices into dangerous territory, with the price rise first seen in fuel now spreading to many other essentials such as wheat, rice and fertilizers.

On average, the CPI in Việt Nam stood at 2.44% in the first six months year-on-year and core inflation increased by 1.25%, which is still relatively low compared to other countries.

Many experts, including Trần Toàn Thắng, director of the National Center for Socio-economic Information and Forecasting, however, warned that from mid-year to the third quarter would be the most stressful period for inflation caused by the trend. world to rising input costs. .

Economist Cấn Văn Lực estimated that this year’s inflation rate will be double that of last year or more and higher than the maximum target of 4% set by the National Assembly.

Other analysts have also said that controlling inflation will not be easy this year as it is already quite high.

They said that’s what forced banks to raise interest rates on deposits to keep depositors.

As a result, deposits rose sharply this year after falling last year as many depositors withdrew their money and invested in more attractive asset classes.

According to the latest SBV data, retail customer deposits increased by 3.28% in the first three months of 2022 to nearly VNĐ5.47 quadrillion.

Corporate client deposits were worth more than VNĐ5.86 quadrillion, up 3.9%.

Many analysts expect the SBV to raise its benchmark interest rates and tighten monetary policies, as central banks in many other countries are doing to contain inflation.

Corollary

Generally speaking, inflationary pressures and production costs are rising sharply and are having a huge impact on the economy, including the banking sector.

But as interest rates on deposits rise as banks scramble for cash, experts point out interest rates on loans cannot keep pace as the government wants banks to hold rates interest on stable loans to support the economy.

Also, most loan agreements cannot be adjusted immediately and depend on their contractual terms.

But many companies in non-priority sectors have begun to worry about the possibility of banks raising lending rates as deposit rates rise unabated.

Trần Thanh Nam, CEO of a company in Tân Bình district of Ho Chi Minh City, said his company manufactures packaging, which is not on the government’s list of priority industries. She must therefore pay an interest rate of 7.5%.

“The rate could be acceptable if the economy is stable and the prices of essential goods are reasonable. But since the prices of all kinds of goods and services necessary for production have already risen sharply, interest rate increases would exert great pressure on producers like us,” Nam said.—VNS

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