Operating interest rates continue to decrease, deposit interest rates simultaneously "break" the 7% mark

Operating interest rates continue to decrease

Early in the afternoon of June 16, the State Bank of Vietnam announced a reduction in operating interest rates. This is the fourth consecutive reduction since mid-March 2023.

The State Bank said that according to the Resolution of the National Assembly, the direction of the Government and the Prime Minister, the State Bank of Vietnam operates monetary policy and banking activities firmly, proactively, flexibly, promptly, effectively, in harmonious, reasonable, and close coordination with fiscal policy and other macroeconomic policies to contribute to controlling inflation, stabilizing the macro economy and the monetary market to strive to reduce lending interest rates for businesses and people, supporting economic growth recovery. Domestic economic growth still faces many difficulties, inflation is under control; liquidity of credit institutions and foreign bank branches is guaranteed.

To continue implementing the National Assembly's policy, the Government's and the Prime Minister's direction on reducing interest rates, supporting people and businesses to increase access to capital, contributing to the recovery of production and business, the State Bank decided to adjust interest rates, effective from June 19, 2023.

Operating interest rates continue to decrease, mobilizing interest rates in series of 7 boxes, figure 1 — On June 16, the State Bank continued to reduce the operating interest rate. Thus, in the second half of June, it is highly likely that the mobilization interest rate at many banks will "break" the 7%/year mark. Illustrative photo

Accordingly, the overnight lending interest rate in interbank electronic payments and lending to cover capital shortages in the State Bank's clearing payments for credit institutions will decrease from 5.5%/year to 5%/year; the refinancing interest rate will decrease from 5.0%/year to 4.5%/year; the rediscount interest rate will decrease from 3.5%/year to 3.0%/year.

The maximum interest rate applied to demand deposits and deposits with terms of less than 1 month remains at 0.5%/year; the maximum interest rate applied to deposits with terms from 1 month to less than 6 months decreases from 5.0%/year to 4.75%/year, while the maximum interest rate for deposits in VND at People's Credit Funds and Microfinance Institutions decreases from 5.5%/year to 5.25%/year; the interest rate for deposits with terms of 6 months or more is determined by credit institutions based on the supply and demand of capital in the market.

The maximum short-term lending interest rate in VND of credit institutions for borrowers to meet capital needs for a number of economic sectors and industries is reduced from 4.5%/year to 4.0%/year; the maximum short-term lending interest rate in VND of People's Credit Funds and Microfinance Institutions for these capital needs is reduced from 5.5%/year to 5.0%/year.

Will deposit interest rates "break" the 7%/year mark?

After 3 adjustments of the State Bank's deposit interest rates since mid-March 2023, the deposit interest rate level has decreased significantly. Notably, this week, before the fourth reduction of the operating interest rate, banks continued to lower interest rates.

The interest rate mobilized by many banks has approached the 7%/year mark. Therefore, after this adjustment, many units will continue to "break" the 7%/year mark for a 6-month term.

Specifically, on the morning of June 16, Saigon Joint Stock Commercial Bank for Industry and Trade (Saigonbank) applied a new listing schedule. The new mobilization interest rate decreased by about 0.2%/year. For the 6-month term, the interest rate decreased from 7.2%/year to 7%/year. Therefore, the room to "break" the 7%/year mark for the 6-month term at Saigonbank is very large.

In addition to Saigonbank, many other units also apply a mobilization interest rate of just over 7%/year such as 7.1%/year (Viet Capital Commercial Joint Stock Bank - BVBank), 7.15%/year (Vietnam Technological and Commercial Joint Stock Bank - Techcombank), 7.2%/year (Saigon Hanoi Commercial Joint Stock Bank - SHB), 7.2%/year (Lien Viet Post Joint Stock Commercial Bank - LPBank), 7.3%/year (Asia Commercial Joint Stock Bank - ACB),...

Currently, there are some units pushing the mobilization interest rate below 7%/year such as: DongA Commercial Joint Stock Bank (6.59%/year), Military Commercial Joint Stock Bank (MB) (6.6%/year), Saigon Thuong Tin Commercial Joint Stock Bank (6.6%/year), Kien Long Commercial Joint Stock Bank (6.7%/year),...

Meanwhile, the Big 4 group (including Joint Stock Commercial Bank for Foreign Trade of Vietnam - Vietcombank, Joint Stock Commercial Bank for Investment and Development of Vietnam - BIDV, Joint Stock Commercial Bank for Industry and Trade of Vietnam - VietinBank and Vietnam Bank for Agriculture and Rural Development - Agirbank) all listed 6-month term interest rates at a low level of 5.5%/year.

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