Bank credit still has much potential for growth

Banks have reduced deposit interest rates for a long time, increased the task of searching clients, actively disbursed corporate and individual loan programs, showing that the banking system's credit liquidity is still surplus.

"Paving the way" for lending

Recently, Technological and Commercial Bank (Techcombank) has reduced interest rates for 3-5 month terms from 2.7%/year to 2.3%/year. Meanwhile, the remaining terms remain stable. Accordingly, the interest rates for terms from 6 to 8 months, 9 - 11 months, 12 - 36 months are 3.4%/year; 3.45%/year and 4.4%/year, respectively. Especially, for regular savings deposits, with interest paid at the end of the term, 12-month term with the limit of VND 999 billion or more, interest rate is 9.5%/year. In addition, demand deposits are still assigned an interest rate of 0.05%/year.

Credit growth is facing difficulties. Banks are trying to find clients with many preferential policies

Vietnam International Bank (VIB) has also announced a reduction in deposit interest rates. For online deposits, VIB has adjusted the reduction by 0.1% - 0.2% in interest rate, for terms of 3 - 18 months. After adjustment, the interest rates for the 3 - 5 month,  7 - 11 month and 15 - 18 month terms have reduced to 3.8%/year, 4.1%/year and 4.8%/year, respectively. For cash deposits over the counter, the interest rate will be 0.1% lower than for online deposits, currently fluctuating around 2.4% - 4.9%/year, applicable to deposits from VND 10 million to less than VND 300 million, with the 1-36 month term, interest at the end of term.

According to the State Bank of Vietnam (SBV), over the past month, 25 banks have announced interest rate reduction in most terms. With the rate of nearly half of the deposit mobilization market share in the entire system, the deposit interest rate was lowered to below 5%/year, the lowest level in recent decades for state-owned banks.

In addition to supporting input cost reduction through reducing deposit interest rates, banks have also proactively reduced costs to reduce lending interest rates while making competition with lending policies to push capital to the market. Micro or small and medium-sized enterprises, small traders, business households... can also access loan programs to supplement working capital to serve the purposes of production, business and life with the terms up to 10 years, 20 years and flexible repayment plans.

According to Nguyen Thai Minh Quang, Director of the Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) - Binh Duong Branch, banks' deposit interest rates are currently lower than the bottom level during the Covid-19 pandemic period. In the context that the solutions of the Government and the State Bank have focused on removing businesses’ difficulties, helping the economy access credit loans and maintain low interest rates. This will help banks reduce mobilization costs to provide credit capital to people and businesses.

Promoting credit

At recent meetings with the Government and the SBV, commercial banks said they had excess capital, despite low interest rates.

Not only competing against each other in interest rates, banks have also competed in lending policies. Specifically, in addition to diversifying mortgage and credit forms to attract borrowers, Vietcombank has also supported clients in opening online applications to create conditions for them to reduce costs. Pham Duc An, Chairman of Agribank's Board of Members said that in the race to reduce lending interest rates to increase credit, banks with good policies will have a competitive advantage.

According to statistics from the SBV, there are currently about VND 13.8 million billion in deposits in the banking system. If they cannot lend, banks will still have to pay interest to depositors. Therefore, in the context of slow credit growth, banks' competitive motivation is even greater. To stimulate lending demand, recently, along with publicizing average loan interest information, banks have launched many preferential loan packages. They have also publicized loans for short and middle-term production and business with the interest rates from 5.3%/year and 6.5%/year for individual clients, small and medium-sized enterprises.

According to Vo Dinh Phong, Director of the SBV- Binh Duong Branch, it is expected that in 2024, credit growth will be at 15% under normal conditions. In the coming time, when macroeconomic conditions are stable, inflation is well controlled, capital flows are guaranteed to the right objects as well as the safety of the system, and it is possible that additional targets will be assigned to commercial banks for higher credit growth.

At the online meeting to promote bank credit in 2024, Dao Minh Tu, Deputy Governor of the SBV emphasized that one of the important tasks of banks is to further reduce costs and simplify lending procedures, striving to reduce lending interest rates to support the economy. Accordingly, based on the Government's direction and the economic growth target in 2024 that is predicted to be about 6% - 6.5%, with inflation being about 4% - 4.5% set by the National Assembly and the Government, the SBV determines the whole system’s credit growth target about 15%, with adjustment appropriate to the situation. At the end of 2023, the SBV also assigned all credit growth targets for 2024 to credit institutions, publicly announced the determining principles for credit institutions to proactively implement credit growth to provide credit capital for the economy.

Reported by Thanh Hong-Translated by Kim Tin