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Interest rates are not reduced but tend to increase

 

The liquidity of the system, despite its abundance, is very uneven among banking groups. This story not only took place this year but is a matter of systematic nature.

The market is expecting a lot of interest rates will drop
Recent developments in the currency market have made the economy more likely to see interest rates drop in the near future. That is, interest rates in the interbank market have dropped to a very low level since the beginning of the second quarter, so O / N rates are only around 0.7-1% per annum. . The SBV has been buying up nearly $ 3 billion from banks since the beginning of the year, which means that there will be about $ 60 trillion injected into the market or a large amount of FII and FDI being Foreign investment poured into Vietnam market ... Thus, the exchange rate was maintained stable in the context of international market fluctuations.

In the face of this development, the State Bank of Vietnam (SBV) has also made moves to set the market's direction by lowering the benchmark interest rates by 0.25 percentage point and short-term lending rates in VND to certain subjects in the sector. 0.5% priority ...

However, interest rates are not reduced but tend to increase
According to the author, some banks, although listing deposit rates only at 4.8-5% per annum, applied to deposits with terms of less than 6 months, much lower than The ceiling rate of 5.5% per year according to the regulations of the State Bank, but will pay more interest when customers directly to the counter, or apply the form of adding interest when customers deposit online savings. The greater the interest rate will be for new clients and large amounts of money. Noteworthy when this trend is tending to increase recently and completely opposite the expectations of the whole economy.

In addition, some small banks still have to mobilize with the ceiling interest rate of 5.5% per annum applied to even one-month term deposits, while for 6-month term, some banks Children accept interest rates up to 7-7.5% per year. With this development, it seems that the expectation of lower interest rates will not happen in the short time ahead.

Why?
The first and most important reason is that the liquidity of the system, despite its abundance, is very uneven among banking groups. This story not only took place this year but is a matter of systematic nature. And this is the reason why interest rates in markets 1 and 2 in Vietnam have no clear relationship. Meanwhile, in the markets of countries around the world, the interest rates on the interbank market is an indicator and have a close relationship with all types of interest rates in the currency market. Therefore, many financial experts believe that the SBV should soon have its own and drastic measures to improve the liquidity of small banks.

In fact, in the restructuring plan of the banking system under Decision 1058, which was approved by the Government on July 19, 1977, the SBV made the first concrete steps. Accordingly, the SBV will appoint an independent auditing firm to audit all CIs. On that basis divide the system into two groups, healthy group and unhealthy group. Unhealthy groups will be monitored and monitored more closely than other credit institutions.

In addition, there are several other reasons that even large banks are raising deposit rates instead of reducing them. This group of banks increased interest rates to keep market share and increase the number of customer base. They can accept a slightly higher mobilization fee but, in return, the bank will sell more products to customers, typically credit cards, billing accounts.

The situation is not only for deposits in VND but also for deposits in foreign currency (USD). However, since the ceiling deposit interest rate in USD is now being applied at 0%, only when customers have a large amount of dollars and accept the use of other products to be compensated by the bank for a fraction of interest. Rate through those products.

With the above developments, it seems that it is difficult for the State Bank to lower the interest rate in the short time ahead if it does not want to apply administrative measures as it did in the past. However, if all the above issues are not resolved, the interest rate cap will resume again ... and the vicious cycle of interest rates will not be thoroughly resolved by the SBV.

Ngoc Khanh
According to the Times

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