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Keeping interest rates stable

22/01/2020

Vietnam’s economy in 2020 is forecast to face challenges in the complicated world situation, which will affect interest rates of banks in Vietnam. Therefore, keeping interest rates stable and lowering interest rates are the goals that need great efforts not only for the banking system.

In Vietnam, monetary policy is still on the right track with many achievements in the management. Different from the uptrend when entering the peak season, the exchange rate and interest rates in the last month of 2019 remained quite calm. Experts of Saigon Securities Incorporation (SSI) said that, in line with the global trend, Vietnam's monetary policy in 2019 has shifted to a more pronounced easing. The State Bank of Vietnam (SBV) has simultaneously reduced operating interest rates, including two times reducing Open Market Operation (OMO) interest rates and three times reducing bill interest rates, by the same total reduction of 0.75%. The fluctuation of interest rates on the interbank marktet has been significantly reduced, about 2.25-4 percent per annum. The SBV also lowered the ceiling of maximum deposit interest rate in dong of commercial banks.

However, the fact shows that the interest rate reduction of banks has not really widely spread, especially the rate of interest rate reduction at long terms, because many small commercial banks are still in high demand for capital mobilization due to the safety requirements of State Bank of Vietnam. Moreover, the State Bank of Vietnam has been using the policy management tool for credit growth limit assigned to commercial banks since the beginning of the year. Therefore, in 2019, deposit interest rates increased in the first three quarters, especially for long terms with an increase of 0.7-1.2 percent, but then decreased slightly in several banks at the end of the year, thanks to easing of the State Bank of Vietnam, however, it was not a large decrease.

With the above developments, the State Bank of Vietnam said that the VND mobilizing interest rates popular at 0.2-0.8 percent per annum for demand deposits and terms of less than 1 month; 4.3-5 percent per annum for term deposits from 1 month to less than 6 months; 5.3-7 percent per annum for term deposits from 6 months to less than 12 months; interest rates for term deposits of 12 months or more at 6.6-7.5 percent per annum. VND lending interest rates are popular at 6-9 percent per annum for short term loans; 9-11 percent per annum for the medium and long term loans. USD lending interest rates are popular at 3-6 percent per annum; in which short-term lending interest rates are popular at 3-4.7 percent per annum, medium and long-term lending rates are at 4.5-6 percent per annum.

The Department of Macroeconomics and Forecast, Institute of Strategy and Financial Policy (Ministry of Finance) forecast that in 2020, Vietnam's economic growth is at 6.5-6.8%, but inflation will remain low at around 3-3.8%. However, the Vietnam’s economy still faces many risks, especially the impacts from the world economy because Vietnam is an economy with high degree of openness, heavily dependent on the external conditions. Therefore, experts believe that keeping interest rates stable will be a great effort.
 

Kylie Nguyen

© 2019 Vietnam Bank for Agriculture and Rural Development No. 2 Lang Ha street, Ba Dinh district, Hanoi, Vietnam
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