Interest rates decrease, where does the money flow?

Recently, banks have continuously adjusted their deposit interest rates downward. The amount of money deposited in credit institutions has also shown signs of slowing down. So what is the investment channel that people choose now?

Deposit interest rates fall to historic lows

On September 14, Vietcombank and Agribank both adjusted their deposit interest rates, with a reduction of 0.2-0.3 percentage points for deposits with terms of 3 months or more. Currently, the interest rates listed at the counter of these two state-owned commercial banks are similar. Specifically, the deposit interest rate for a 1-month term remains at 3%/year; the 3-month term decreases by 0.3 percentage points, to 3.5%/year; the 6-9 month term decreases by 0.2 percentage points, to 4.5%/year. Deposits with terms of 12 months or more decrease from 5.8%/year to 5.5%/year - equal to the historical low recorded during the COVID-19 period. For online deposits, Agribank mobilizes at an interest rate slightly higher than the interest rate listed at the counter; while Vietcombank mobilizes at an equivalent interest rate.

Not only Vietcombank or Agribank, according to statistics, from the beginning of September 2023 to now, 21 banks have reduced deposit interest rates. Specifically, Bac A Bank, MB, Sacombank, ACB , Nam A Bank, KienlongBank, MSB... Among them, some banks recorded interest rates equal to or lower than the group of state-owned commercial banks (usually posting the lowest interest rates on the market) such as ACB announced the interest rate for 12-month term deposits with an interest rate of only 5.3%/year, MB and KienlongBank mobilized 12-month term deposits with an interest rate of 5.5%/year...

Thus, compared to the peak period at the end of last year, up to now, the mobilization interest rates of credit institutions have decreased by 3-4 percentage points in most terms. Currently, the savings interest rates for individual customers listed by banks at the counter are at 3-4.75%/year for terms under 6 months, 6-month terms are around 4.7-6.5%/year, 12-month terms are at 5-6.8%/year, and over 12-month terms are around 4.2-6.9%/year. Thus, the interest rate of 7%/year is almost gone from the market.

The reason for the current sharp decline in deposit interest rates, according to economic experts, is that since the beginning of the year, the State Bank has lowered its operating interest rates four times, coupled with the abundant, even surplus, liquidity in the banking system. In theory, when deposit interest rates go down, the attractiveness of the savings channel will decrease. At this time, cash flow will shift to other investment channels such as stocks, real estate, gold, etc. in the hope of finding better yields.

Cash flow diversion?

Statistics from the State Bank of Vietnam, Phu Yen branch, show that in the first 6 months of this year, the total mobilized capital in the area continuously increased, peaking in June 2023 with a total capital of VND 39,694 billion, an increase of 9.2% compared to the end of 2022. However, in July, the amount of deposits decreased by VND 316 billion compared to the previous month, to VND 39,378 billion, an increase of 8.36% compared to the end of 2022. By August 2023, the total mobilized capital increased to VND 39,565 billion, an increase of 8.88% compared to the end of 2022, but still not equal to the peak of June. This means that, although the savings interest rate level has decreased, idle money has not left the bank, but the growth rate of mobilized capital of credit institutions is showing signs of slowing down.

Ms. Nguyen Le Vy in Ward 5 (Tuy Hoa City) said: My husband and I have a savings book that is about to mature, so recently, I have been regularly monitoring information about interest rates of banks. I see that interest rates are continuously decreasing, not only state-owned commercial banks but also joint-stock commercial banks have decreased very deeply, many interest rates are only half of the peak level of last year. Currently, because we have no other plans, we continue to maintain savings but will choose short terms to be flexible with capital sources.

Meanwhile, according to Mr. Tran Manh in Ward 4 (Tuy Hoa City), in recent months, he has been researching the stock market and has tried investing part of his savings through this channel. “I am an amateur, participating in the market through the guidance of a few friends. Recently, thanks to the recovery and good growth of the VN-Index, I have made a small profit. However, I have determined that investing in stocks requires a lot of knowledge. If you want to win, you have to study seriously and invest long-term, otherwise you will face many risks,” said Mr. Manh.

Regarding the real estate investment channel, the market is still relatively quiet. “Recently, banks have continuously announced reductions in lending interest rates and launched many incentive packages to stimulate credit demand. This is a positive factor to support the recovery of real estate. However, it may take some more time for the market to warm up,” said Ms. TTAT, a real estate investor in Ward 7 (Tuy Hoa City).

According to economic experts, in theory, when interest rates go down, the attractiveness of savings deposits will decrease. At this time, money will flow to other investment channels such as stocks, real estate, gold, etc. in the hope of finding better returns.

LE HAO

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