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Banks say money plentiful, but many businesses not borrowing

The State Bank of Vietnam (SBV) reported that as of the end of May, credit had grown by 1.96 percent compared with the end of 2019, lower than the 5.74 percent of the same period last year.

In early June, the ‘big four’ – VietinBank, Agribank, Vietcombank and BIDV – all cut deposit interest rates.




VietinBank has eased interest rates by 0.1-0.45 percent compared with May 2020. Agribank has also made a similar move. It offers interest rates of between 4 percent and 6.5 percent for the 1-36-month term deposits.

Vietcombank has lowered the interest rate by 0.25 percent per annum for 3-month-term deposit to 4.25 percent per annum, and lowered by 0.1 percent for 1- and 2-month term deposits to 4 percent.

Vietcombank has lowered the interest rate by 0.25 percent per annum for 3-month-term deposit to 4.25 percent per annum, and lowered by 0.1 percent for 1- and 2-month term deposits to 4 percent.

The moves of the big four have triggered a new wave of interest rate cuts among mid-end banks. Ban Viet cut interest rates slightly by 0.05-0.1 percent per annum, while Techcombank now pays 5.2 percent per annum for 12-month-term deposit.

Analysts predicted that banks would reduce interest rates further by another 0.1-0.3 percent

The figures show banks have plentiful money, but demand for loans is very weak.

According to Bui Ngoc Son from the Institute of World Economics and Politics (IWEP), as the world is still struggling with the pandemic and demand is weak, businesses are not expanding production.

“What do they borrow money for? No one would take risk borrowing money at this moment to open shops and scale up production,” Son said. “Tourism, accommodation services, food and beverage, transport, textile and garment, footwear, and oil and gas are still struggling with recession."

Individual clients are also not borrowing money now as people are tightening their purse strings as a result of job loss and the unemployment rate.

Son warned that banks might loosen conditions for lending and pour money into risky sectors.

“Borrowers will invest in risky deals, or they will deliberately generate demand to seek profit from speculation. It will be very dangerous,” he said.

Meanwhile, Nguyen Hoang Hai, deputy chair of the Vietnam Association of Financial Investors (VAFI), believes that the problem lies in high interest rates.

He said the lending interest rates are high because banks have to pay a lot for deposits. In many countries, the deposit interest rate is zero percent, while in Vietnam, the interest rates are between 4 and 7 percent.

Linh Ha 

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