VietNamNet Bridge – Vietcombank, one of the biggest commercial banks in Vietnam, has pioneered in slashing the deposit interest rate to 6 percent per annum. Other banks have unanimously reduced the lending interest rates.

Vietcombank late last week unexpectedly announced the reduction of the dong deposit interest rate to 6 percent per annum. This was for the second time within one month the bank lowered the deposit interest rate, even though the central bank has not mentioned the possibility of the slashing the ceiling deposit interest rate.

Other commercial banks still pay high for the deposits at 7.5 percent per annum at maximum. However, analysts have predicted that they would follow Vietcombank’s move to slash the deposit interest rate in just some days.

The latest report of the National Finance Supervision Council about the April’s macro economy also said that the interest rates may decrease by another 2-3 percent in the time to come, since the inflation has been curbed at the low rates and the credit has been growing slowly by 1.5 percent.

There’s one more reason that may encourage banks to slash the deposit interest rates – their liquidity has been improved considerably, therefore, they don’t have to pay high to mobilize capital. The interest rates on the open market are at relatively low levels with the rates of between 3 percent and 5 percent for overnight and one-week loans.

If the interest rates reduce by another 3 percent as predicted by the National Finance Supervision Council, the new interest rate would be 4.5 percent per annum. If so, the current rate of 6 percent being applied by Vietcombank is not the deepest low at all.

The sharp cut of the deposit interest rate to 6 percent per annum has allowed Vietcombank to slash the lending interest rates, thus becoming the bank offering the most competitive interest rate.

Its short term loans now are provided at the interest rate of 10.5 percent per annum, while medium and long term loans at 11.6 percent.

Vietcombank is also running some preferential lending programs, providing short term loans valued up to VND30 trillion and $700 million at the interest rates of 7.5 percent for dong and 2 percent for dollar loans.

Other banks, though having not slashed the deposit interest rates, have also cut the lending interest rates in an effort to boost the lending.

In late April 2013, BIDV launched a credit program, offering preferential attractive interest rates to the clients who are individuals and business households. The program would last until the end of July 10, 2013.

The bank has committed to provide loans at the attractive interest rate of 9 percent per annum for the first 3 months of the loaning.

Ocean Bank has been providing short term loans at surprisingly low interest rate of 6.8 percent per annum, which is even lower than the ceiling interest rate. However, only some specific business fields can only access the bank loans.

The stock index has increased on the good news about the interest rate reductions and the VND30 trillion bailout to be pumped by the government into the real estate market. The VN Index on May 6 increased by 0.78 percent to 478.94 points, while the HN Index also increased by 1.68 points.

In related news, export companies have urged the central bank to reduce the dollar lending interest rate to 5 percent per annum.

Compiled by C. V