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Deposit rates fall to record low as credit growth crawls in Vietnam

An employee counts Vietnamese banknotes at a bank in Hanoi. Photo by VnExpress/Giang Huy. Sketched by the Pan Pacific Agency.

HANOI, Oct 12, 2020, VN Express. Commercial banks have lowered their deposit interest rates to their lowest levels in years as the Covid-19 pandemic slows credit growth. Vietnam’s four biggest state-owned banks by charter capital, BIDV, VietinBank, Vietcombank and Agribank have all lowered their annual interest rates for 12-month term deposits from 6 percent to 5.8 percent this month, VN Express reported.

Private banks like Techcombank and MB have also cut their annual rate on fixed term deposits to 5.8 percent, while VPBank lowered its rate from 6.2 percent to 5.7 percent.

Nearly 20 banks in the country have lowered the rate since the beginning of this month by up 0.5 percentage points.

Brokerage firm Vietcombank Securities Ltd had forecast last month that with banks having high liquidity and facing difficulties lending due to the negative impacts of Covid-19 on businesses, they might lower deposit interest rates by 0.8-1 percentage point throughout this year.

Vietnam’s credit growth in the first nine months this year was just 5.12 percent, far below the double-digit figures recorded in the last three years.

In August, the State Bank of Vietnam revised its credit growth target this year from 14 to 10.1 percent. It has also cut its policy rates four times so far this year to pump-prime the economy amid the pandemic.

However, market research company Fitch Solutions has forecast that Vietnam’s credit growth will only reach 7 percent this year, partly due to the manufacturing sector being heavily tied to key markets such as the U.S. and the E.U., both hit hard by the pandemic.

“A weak economic environment does not bode well for the creditworthiness of many borrowers. As such, we expect banks to continue enforcing tighter loan disbursement standards to safeguard against a sharp deterioration in asset quality,” it said in a report.

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