In the context of credit flow being difficult at the beginning of the year due to interest pressure, many banks have begun to calculate to reduce output interest rates, stimulating capital demand. In fact, savings interest rates are gradually "cooling down" in market 1 (residents and economic organizations) by about 1-1.5%/year compared to before and after the Lunar New Year 2023 and in market 2 (interbank market). Specifically, the average overnight interbank interest rate listed by the State Bank on February 13 (the main term accounting for more than 95% of transaction volume) has decreased to 4.55%, down from 4.91% on February 10, from 5.49% in the previous session and 6.21% recorded in early February 2023. Along with the overnight term, interest rates for 1-week, 2-week, and 1-month terms have also decreased.
In the first half of February 2023, the State Bank of Vietnam continued to withdraw nearly VND 150,000 billion, while pumping less than VND 50,000 billion into the market. Since the beginning of February, the State Bank of Vietnam has increased liquidity for the system, credit room has opened with a target of 14-15% and will be adjusted accordingly, interbank interest rates have also "cooled down"... These factors support the downward trend in interest rates.
This is also one of the conditions for banks to consider adjusting output interest rates through low-cost capital packages to attract borrowers. Because in the context of high interest rate pressure, it is very difficult to attract borrowers, while banks have been granted credit limits since the beginning of 2023, so they also expect to soon boost credit activities, so they are forced to balance the issue of mobilization and lending interest rates.
For example, Vietcombank has officially announced a 0.5% interest rate reduction for customers, applicable from the beginning of 2023 to April 30, 2023.
A preferential package with a total value of about VND3,000 billion with a maximum loan interest rate reduction of 1% has just been proactively implemented by Southeast Asia Commercial Joint Stock Bank ( SeABank ) to support individuals, business households, and business establishments with short-term loan needs of up to 12 months. Loans for production and trade in areas such as livestock, agriculture, forestry, and fishery will also be reduced compared to the bank's current lending interest rates.
Similarly, with the goal of deploying credit capital towards small and medium-sized enterprise and micro-enterprise customer groups in 2023, Orient Commercial Bank (OCB) also reserved about VND 25,000 billion for preferential loans with short-term lending interest rates from 8-12%/year for businesses.
Viet Capital Bank has recently launched a loan program called “Preferential loans, super profitable business” for individual and corporate customers with extremely preferential interest rates from only 10.5%/year. The loan package has a limit of 1,000 billion VND, for customers borrowing from February 1, 2023 to April 30, 2023 or until the program expires.
From February 10, 2023, the Military Commercial Joint Stock Bank (MB Bank) will implement a program to reduce loan interest rates for corporate customers with revenue under 100 billion VND. Customers can register for a loan using the Online Disbursement feature right on the Biz MB Bank platform to enjoy preferential interest rates reduced by up to 1%/year... Meanwhile, recently, the Bank for Investment and Development of Vietnam (BIDV) has launched a new short-term loan package with a scale of 30,000 billion VND to serve production and business needs with preferential interest rates from only 8%/year for loans with terms of less than 6 months; or only from 9%/year for loans with terms from 6 - 12 months...
According to many economic and financial experts, although there is still a lot of pressure, the interest rate level is likely to peak in the first half of 2023 and gradually "cool down", thereby reducing pressure on lending interest rates.
On the contrary, currently on the list, most banks have raised their savings interest rates to a maximum of 9.5%/year for long-term terms of over 1 year and reached the ceiling of 6%/year for terms of under 6 months. However, in the context of fierce competition, banks have tried to offer attractive deposit packages, with interest rates in some places exceeding 9-9.35%/year for terms of 6-12 months. For terms of 1-3 months, banks with the highest interest rates of 6%/year are Bac A, Dong A, Kien Long, PGBank, SCB, VIB, VietCapitalBank... For terms of 6 months, Dong A maintains the highest interest rate of 9.35%; MB offers the lowest rate of 5.7%. At Big4 banks, BIDV, Vietnam Joint Stock Commercial Bank for Foreign Trade (Vietcombank) and Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank) offer interest rates of 6%/year; Agribank is 6.1%/year… Recently, at the conference on credit work, the general directors of commercial banks agreed to reduce the mobilization interest rate to a maximum of 8.7%/year, instead of 9.5%/year as previously committed to the Vietnam Banking Association. However, small and medium-sized banks still maintain high interest rates.
According to analysts from Fiin Group, market liquidity cannot improve soon due to the congestion of public investment disbursement and lack of measures to support the corporate bond and real estate markets. Meanwhile, in the world, the Fed continues to increase interest rates, possibly to 5% this year and maintain this level until the end of 2023. With this double impact, VND interest rates cannot decrease for at least the next 6-12 months.
Regarding policy making and macro management, the Government has also requested the SBV to urgently submit the Draft Decree amending and supplementing Decree No. 31/2022/ND-CP in February 2023 to promptly remove obstacles and promote disbursement of the 2% interest rate support package through the commercial banking system. Specifically, in Resolution No. 10/NQ-CP dated February 3, 2023 of the regular Government meeting in January 2023 online with localities, the Government requested the SBV to urgently submit it in February 2023 to promptly remove obstacles and promote disbursement of the 2% interest rate support package through the commercial banking system. At the same time, coordinate with relevant agencies to review and propose to competent authorities to transfer the unused budget to other spending tasks or other appropriate forms of support.
The Resolution assigns the State Bank to preside over and coordinate with agencies and localities to operate monetary policies firmly, proactively, flexibly, promptly and effectively. Encourage credit institutions to reduce costs to stabilize interest rates, strive to reduce lending interest rates; ensure liquidity and safety of the credit institution system. Operate exchange rates appropriately; coordinate synchronously and closely with fiscal policies and other macroeconomic policies. The State Bank shall operate credit growth reasonably, focusing capital on production, business, priority sectors and growth drivers, and control credit in potentially risky sectors. Continue to remove difficulties in real estate credit for real estate enterprises, home buyers and real estate in accordance with the direction of the Prime Minister in Directive No. 03/CT-TTg in 2023.
In the recently released 2023 macroeconomic outlook report, Vietinbank Securities Company forecasts that deposit interest rates will tend to decrease gradually towards the end of 2023, especially when the US Federal Reserve (Fed) is expected to reduce the operating interest rate in the fourth quarter of 2023. Because the inflation situation in developing countries and emerging markets is likely to be controlled more flexibly. Operating interest rates in Vietnam peaked in January 2023.
In fact, the maximum mobilization interest rate at major banks is currently only about 8.7%/year at state-owned banks and 9.5% at joint-stock banks, instead of the maximum of 9.5%/year at the end of January 2023. The main reason comes from excess liquidity in the banking system when banks have mobilized a large amount of capital from market 1 at high interest rates in 2022, especially in the context of tightly controlled capital supply. The operating interest rate will be maintained at the current level in 2023. In addition, the mobilization interest rate tends to decrease gradually towards the end of 2023, this trend will increase when the Fed is expected to reduce the operating interest rate in the fourth quarter of 2023.
The Government's expansionary fiscal policy in 2023 will also help a large amount of money return to the system and increase the economy's cash flow. Accordingly, the development investment spending plan for 2023 is nearly VND 726,700 billion, an increase of 38% compared to the 2022 plan and 67% higher than the estimated implementation in 2022. Basically, the State Bank will maintain a relatively tight monetary policy through interest rate tools, instead of restricting credit room as last year. In general, liquidity in 2023 will be relatively abundant, but at a high interest rate level.
Currently, the State Bank of Vietnam is quite cautious about inflation. If inflation in February and March decreases significantly, then we can expect that interest rates will tend to decrease. However, the speed of the decrease depends on the State Bank of Vietnam's viewpoint. If we are cautious, we need to wait for a clear signal from the Fed stopping raising interest rates. Then, in May, Vietnam may shift to lowering interest rates.
In fact, Vietnam's real interest rates are still higher than many countries in the world, so economic and financial analysts have also proposed that the State Bank should consider lowering interest rates soon to support the economy and businesses. When interest rates are lowered, the economic outlook will be more positive, not only for the real estate industry but also for other industries.
With the current exchange rate conditions, according to many economic and financial experts, Vietnam's mobilization interest rate at 7-8% is appropriate./.
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