Authorities want to reduce the cost of capital to support businesses, stimulate investment, and create further impetus for high growth targets, while commercial banks are continuously launching preferential credit packages and committing to lowering interest rates for various customer groups.
When the LDR is stretched
But the market is sending a different signal: Money in the banking system is no longer as abundant as before, while the economy 's need for capital is growing.
According to a representative of the State Bank of Vietnam, by the end of April 2026, outstanding credit in the entire system had exceeded 19.4 million billion VND, an increase of more than 18% compared to the same period last year, while the difference between lending and deposit mobilization had reached approximately 2 million billion VND.
According to SSI Research, the actual loan-to-deposit ratio (LDR) has now reached approximately 112%, far exceeding the 85% threshold. Even the Big4 banks are approaching the liquidity limit. This indicates that the cash flow in the system is being stretched to meet the capital needs of the economy.
However, it is worth noting that deposits are starting to shift away from banks. According to the Q1/2026 financial report obtained by VietNamNet, many banks recorded a sharp decline in customer deposits, with BIDV alone seeing a decrease of over 80,000 billion VND in just one quarter, even though deposit interest rates have increased in many places.
According to Dr. Le Xuan Nghia, one of the reasons for this situation is related to the confidence of business owners.
He explained that many businesses are now tending to hold cash or withdraw money from banks due to concerns about taxes and policy risks. “In just the first two months of 2026, the amount of money withdrawn from the banking system was equivalent to the entire year of 2025. The majority of that money belongs to businesses,” he said.
As money begins to leave the system, banks are forced to increase competition for deposits to maintain liquidity, while the ability to drastically reduce lending interest rates becomes much more difficult.
When people begin to feel uncertain about the policy environment or the future of the currency they hold, money flows will shift very quickly. People hold cash, hold gold, or seek other assets, while banks must keep deposit interest rates attractive enough to prevent further outflow of money.
Monetary policy is gradually running out of room for maneuver.
Meanwhile, the possibility of lowering interest rates at this time is also limited due to persistent exchange rate and inflationary pressures. The Fed continues to maintain high interest rates, the US dollar is strengthening, Vietnam has returned to a trade deficit, and the CPI has exceeded the target set by the National Assembly for the whole year.
Therefore, managing monetary policy at this time is almost like walking a tightrope. On the one hand, if interest rates are lowered too sharply, exchange rate and inflationary pressures could return. But on the other hand, if interest rates are kept high for too long, businesses will continue to struggle, and the economy's demand will weaken further.
High interest rates have actually started impacting the real estate market, with many home loans now reaching 15-16% per year after the initial preferential period. But this is no longer just a story of the housing market; it reflects the high cost of capital for the entire economy.
The bigger issue isn't a few percentage points of interest rate, but how the economy is living off bank capital.
Currently, the scale of credit is equivalent to about 150% of GDP, while the corporate bond market is only about 10% of GDP and only about 7-8% of total outstanding bank credit.
In many economies, the capital market shares the burden with banks. In Vietnam, however, everything related to capital ultimately returns to the banks.
From real estate and infrastructure to manufacturing, everything depends on credit capital, while about 80% of currently mobilized capital is short-term but must be lent out for medium and long terms.
In other words, Vietnamese banks are now not just performing banking functions; they are also playing the role of a capital market. After years of injecting credit to boost growth, monetary policy now seems to have run out of room for maneuver.
For many years, whenever the economy faced difficulties, the familiar solution was to expand credit, lower interest rates, and inject more capital through the banking system. But with credit reaching around 150% of GDP, the gap between deposits and loans widening, and deposit flows shifting, the possibility of aggressive monetary easing as before will become much more difficult.
Perhaps the era of simply pumping more credit whenever things get tough is gradually reaching its limit.
This will become even clearer as Vietnam enters a phase of aiming for double-digit growth. According to calculations by the Ministry of Finance, the total social investment capital demand for the period 2026–2031 is estimated at approximately 38.5 million billion VND, with about 5.1 million billion VND in 2026 alone, of which the credit capital demand is expected to be around 1.8 million billion VND.
This means that pressure on interest rates and the banking system will continue, and interest rates in the 2026-2027 period may find it difficult to return to the cheap money levels of the past.
However, that does not mean Vietnam has no way to reduce the cost of capital for its economy.
The problem lies in sharing the capital burden with the banks.
To sustainably reduce interest rate pressure, Vietnam will need to accelerate the disbursement of public investment, resolve outstanding projects to allow funds to flow back into the real economy, and further develop the corporate bond market and long-term capital sources.
When the bond market operates transparently and regains confidence, the pressure for medium and long-term capital will no longer be as heavy on the credit system as it is currently.
Furthermore, consideration must also be given to expanding the capacity to mobilize international capital and attract long-term foreign capital flows to share the pressure on domestic capital, because with the scale of capital demand reaching tens of trillions of dong in the coming period, the domestic banking system can hardly bear the entire growth needs of the economy alone.
Perhaps that's why the issue now is no longer simply about further interest rate cuts of a few percentage points. More importantly, it's about maintaining confidence in the Vietnamese dong and finding additional non-bank sources of capital so that the economy doesn't become overly dependent on credit.
Source: https://vietnamnet.vn/ganh-nang-chinh-sach-tien-te-2516286.html
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