High demand for capital at the end of the year

High demand for capital at the end of the year

With nearly a month left until the end of the year, credit growth has already exceeded the 16% target for this year by the end of November, according to a report by the State Bank. Capital flows play an important role in supporting economic growth recovery.

The highest credit growth in 10 years can be explained by the fact that other economic indicators are also growing positively. The total import-export turnover of the whole country has exceeded the 800 billion USD mark, industrial production has also grown by double digits. And in this year-end period, which is always the peak of production and business, the demand for capital also increases.

The factory’s confectionery production lines are running at double capacity to prepare for Tet. All input materials for production require capital to be purchased in larger quantities.

Mr. Do Cong Quang - Branch Director of Huu Nghi Food Company in the North said: "We borrowed bank capital during the peak production period. Since mid-October, we have prepared raw materials for production for Tet. Because, with increased output, we have worked overtime to produce at full capacity in all factories."

Meanwhile, at the printing factory, everyone is focused on printing new year calendars and Tet packaging. It is estimated that orders have increased by about 50% compared to before. They are borrowing money from the bank, with a limit in advance so that they can disburse immediately when needed. However, because it is the end of the year, some banks have also announced that they will increase lending interest rates.

Ms. Nguyen Mai Phuong - Director of InChi Vietnam Printing and Advertising Company shared: "Recently, the bank announced that if the next loans are disbursed, the interest rate will increase by 0.3%/year. Compared to the current capital demand and business situation, this interest rate is still acceptable for businesses while the capital demand is increasing sharply."

Accepting a higher interest rate, as long as capital is provided in time for production, is also the common mentality of some businesses at this time. According to statistics from the State Bank, about 78% of total outstanding loans are focused on production and business, reflecting the management orientation closely following the growth drivers as directed by the Government .

Balance capital sources, stabilize loan interest rates

If we observe the market, we can see that the mobilization interest rate is increasing, from 0.2% - 0.6%/year, mainly in terms of 6 and 12 months. However, there are also other terms, some banks adjust the interest rate down depending on their capital balance.

The official report from the State Bank of Vietnam shows that by mid-October, the average lending interest rate for new loans was about 6.55%/year, down 0.38%/year compared to the end of last year. These figures show that, despite the increase in deposit interest rates, banks still have to be cautious in lending, because the consistent direction of the Government and the Prime Minister is to stabilize lending interest rates to support people and businesses to restore production and business. In fact, banks are also implementing many solutions to balance interest rates, input and output capital.

Besides deposits from residents, banks can attract capital from many other sources, such as deposits from businesses, or receive entrusted capital from domestic and international organizations and investment funds... Many of these sources have lower interest rates than the interest rates mobilized from residents.

Mr. Pham Nhu Anh - General Director of MB Military Bank commented: "To be ready for credit development in the last months of the year, we are preparing resources. Firstly, we are increasing capital mobilization sources, especially low-cost mobilization sources to ensure the lowest capital cost to supply to the market. Secondly, we are segmenting different customer groups to have different policies and credit packages."

Another source considered as the golden key, helping banks to open up cheap capital is the demand deposits that people keep in their payment accounts, with almost negligible interest rates. To get this cheap source of money, banks must accelerate digital transformation and retain users.

Ms. Nguyen Thi Huong - Deputy General Director of An Binh ABBank commented: "Integrating digital utilities and expanding payments has helped the online transaction volume of individual customers grow by 49% compared to the same period last year. At the same time, it also promotes non-term deposits of corporate customers through payroll products via accounts, financial solutions for managing cash flow, creating a source of capital with low cost and sustainability for the whole system".

Mr. Nguyen Quang Huy - Executive Director, Faculty of Banking and Finance, Nguyen Trai University said: "Banks must have smart and digital solutions, then there will be more customers depositing money without a term, helping to average the cost of capital in a reasonable way."

In addition, to avoid output lending interest rates increasing along with input deposit interest rates, banks need to reduce their dependence on interest income. Instead, they need to diversify their income sources from other services.

Ms. Ta Thanh Huyen - Lecturer of Banking Academy shared: "Banks can diversify their business activities, increase non-interest income, and optimize their operating apparatus. They will have room to stabilize output interest rates in the context of input interest rates tending to increase".

Experts also recommend that new loans should be well controlled to avoid costs arising from bad debt handling. This method helps banks optimize capital flow efficiency.

Maintaining the stability of lending interest rates, despite facing many challenges, many experts believe that the US Federal Reserve's recent two interest rate cuts have also eased some of the pressure on domestic interest rate management. To ensure liquidity for the system, the State Bank has also continuously pumped net capital over the past 7 weeks. Last week alone, it was nearly VND99,000 billion - the strongest net injection in 10 months to support stable capital sources for commercial banks.

Source: https://vtv.vn/nhu-cau-von-cuoi-nam-tang-cao-100251204232831697.htm