Banks raise interest rates to attract depositors
Noticeably, quite a few commercial banks are starting to join the deposit interest rate hike race along with small and medium-sized banks, they adjusted a deposit interest rate of more than 7 percent for a 12-month term.
Specifically, customers who deposit money at CBBank for 12 months are enjoying a rate of 7.45 percent per year and 7.5 percent for online savings customers from August 6 meanwhile depositors at Sai Gon Commercial Bank (SCB) are enjoying a yearly interest rate of 7.3 percent -7.6 percent for a 12-month term on both over-the-counter and online channels.
Many other banks such as VPBank, KienlongBank, LienVietpostBank, NamABank, and Techcombank also have applied deposit interest rates of over 7 percent with terms of 12 months or more.
Commercial banks have not only adjusted interest rates for long-term deposits but also for short-term under 12 months, even 1-3 months to increase interest rates from 0.2 to 0.5 percentage points.
Currently, many banks are applying interest rates of approximately 4 percent for deposit periods from 1-3 months. Furthermore, commercial banks such as Vietcombank, BIDV, and Agribank also increased 0.1-0.2 percentage points of deposit interest rates in most terms.
Although commercial banks have not been able to accelerate lending in the past time because the credit room has not been loosened, the State Bank (SBV)'s data has shown that by the end of July 2022, credit for the economy still increased by 9.27 percent compared to the beginning of the year, the highest level in the past five years whereas deposit growth was just over 4.5 percent; accordingly, banks have had no choice but resorted to raising deposit rate for capital mobilization.
Many financial experts said that when the SBV grants more credit room in the near future, the deposit interest rate hike race between commercial banks will be hotter. Analysts of SSI Securities Company forecast that in the last four months of 2022 when commercial banks are allowed to extend credit growth limits, the demand for capital input in the banking industry will increase and will also push up interest rates to increase by 0.5-0.7 percentage points.
Therefore, for the year, the deposit interest rate may increase by 1-1.5 percentage points, leading to the lending interest rate for new disbursements to be 1-2 percentage points higher than in 2021. However, it normally takes 1-2 quarters for the lending interest rate to adjust to the deposit rate.
The sharp increase in bank interest rates makes the deposit channel attractive to investors and depositors. Specifically, according to the State Bank, in the first five months of 2022, the total deposit balance of residential customers at the bank reached nearly VND5,569 million billion, an increase of 5.07 percent compared to the end of last year, equivalent to a net increase of VND268,480 billion. Compared to the same period in 2021, the deposit growth of this group of customers has nearly doubled.
On average, in the first five months of the year, people deposited nearly VND1,790 billion in commercial banks every day.
Meanwhile, in the first six months of 2022, data from the State Securities Commission also shows that the trading liquidity of the stock market has now decreased to VND10,000 billion-VND12,000 billion a day, down about 60 percent compared to the end of 2021 with VND30,000 billion-VND35,000 billion a day.
Real estate experts also said that the real estate market is slowing down due to credit tightening by banks or high lending interest rates; thus, so many investors have switched to keeping cash that flows into the savings deposit channel while waiting for investment opportunities.
In addition, SBV’s Circular 04/2022 stipulated that if a part of the deposit is withdrawn before maturity, the rest will still enjoy the same interest rate as before instead of just the interest rate on indefinite deposits, which has created more attractiveness for deposit channel at commercial banks.
Customer Ha Huyen in Thu Duc City explained that she is presently depositing in banks for long-term deposits to enjoy the best interest rate though she is investing in many channels.
Moreover, she said that when she needs money suddenly as she finds an investment opportunity, she can withdraw the money at any time but she still enjoys the same interest rate.
Many commercial banks also acknowledged that long-term savings customers have increased significantly thanks to the policy of Circular 04/2022; not to mention, many banks’ special preferential policies. Specifically, the Orient Commercial Bank (OCB) not only supports customers to withdraw a part of the principal for deposits from August 1 when Circular 04/2022 takes effect but also applies to all deposits before August 1.
Mr. Du Xuan Vu, Deputy Director of OCB's retail division, said that allowing early withdrawal of deposits not only benefits customers but also creates favorable conditions for the bank to attract medium and long-term deposits as well as diversify products to attract and increase deposits from the people, thereby meeting the borrowing needs of customers.