Saturday, August 30, 2014 7:08:58 AM - Markets closed
VN-INDEX 636.65 +4.62/+0.73%
HNX-INDEX 87.04 +0.25/+0.29%
UPCOM-INDEX 53.92 +0.95/+1.79%
Interest rates to be slashed further, but what for?
Source: VietNamNet - 12/5/2012 8:50:00 AM
 (0 ratings. You must sign in to rate.)
It is highly possible that the State Bank would slash the deposit interest rate further – by one percent, to make it easier for businesses to access bank loans. However, economists have warned that this would do more harm than good.

Interest rates decrease further?

It is expected that the ceiling short term deposit interest rate would be reduced by another one percent to 8 percent in some days, in an effort to help push up lending and provide more capital to businesses in the end of the year production season.

The current conditions all support the interest rate reductions. Investors cannot make profit when they inject money in the real estate or stock markets which have been frozen for a long time. They also do not think of buying gold because of the high risks, or buying foreign currencies, because the stable exchange rate would not bring profits.

Meanwhile, commercial banks have stopped mobilising capital in gold. All of these factors have made depositing become the biggest choice of people for nowadays.

With the current deposit interest rates of between nine and 12 percent per annum, depositors can enjoy real positive interests, which make them feel secure to deposit money at banks. This explains why the cash flow keeps flowing into banks.

The abundant capital has prompted commercial banks to reduce the interest rates of long term (more than 12 months) deposits. Techcombank, for example, has slashed its highest interest rate from 12.5 percent to 12 percent. Eximbank has also eased the interest rates by 0.3-0.8 percent.

The latest report by the State Bank of Vietnam also showed the downward tendency in the interbank interest rate performance. Overnight interest rates stayed at 1.83 percent per annum last week, while the rates were 3.04 percent for one-week loans and 3.28 percent for two-week loans.

The liquidity excess proves to be the biggest reason that makes people believe that the lending interest rates would go down.

Vu Viet Ngoan, Chair of the National Finance Supervision Council, has been repeatedly urging banks to reduce the interest rates, saying that businesses would be able to resume their production only if the interest rates become more reasonable.

Haste makes waste

While some economists believe that easing the interest rates is the most important task for now to revive the local production, others believe that it would be better not to adjust the interest rates now, if considering the macroeconomic indexes.

An analysis pointed out that the consumer price index (CPI) would increase by more than seven percent by the end of December. As such, if slashing the ceiling interest rate to 8 percent, the real interest rates depositors can enjoy would be not attractive enough. If so, the capital would keep away from banks, thus leading to the lack of capital.

The analysis showed that there is no more room to slash interest rates further, and that if deliberating to reduce the interest rates, this may lead to the fact that Vietnamese people would refuse to keep the local currency.

Some bankers say the interest rate reductions would not have much significance. In fact, businesses cannot access to bank loans because they cannot satisfy the requirements set by banks, not because of the high interest rates.

The bankers have affirmed that they would be ready to lend at lower interest rates if businesses have feasibility business plans.
Newer News
29/08 State Bank exec discusses credit rating system development
29/08 PM Dung: Quickly restructure banking system to make it safe
29/08 Government bond transactions near US$1bil
28/08 SBV battles to control bad debts
28/08 SBV yet to mull deposit rate ceiling cut
26/08 Credit growth slow in Ha Noi
26/08 Bank employees still living large despite doldrums
23/08 Customers embrace bank card payments
22/08 SBV keeps buying foreign currency
22/08 Borrowers shocked with premature debt repayment charge at bank
Older News
05/12 Reshaping of gold market speeds up
05/12 Insurers may fail the target for 2012
04/12 Government bond auction raises US$33.5 million
04/12 Government promises tax breaks for businesses in 2013
04/12 Officials urge control on shadow banking services
04/12 Lending rates seen lower
03/12 Vietnam Five-Year Bond Yield at Three-Month Low on Bank Demand
03/12 Interest rates to be slashed further, but what for?
03/12 Gold still hot though banks stopped accepting gold deposits
03/12 Banks move on soft home loans
 
Newsletter Signup
Top Stories
August CPI growth hits 9-year low
CPI prolongs rise in major cities as food costs increase
National CPI rises 0.23% in July
CPI increases in Ha Noi, HCM City
Hanoi’s CPI increases by 0.18% in July
Market Update
Last updated at 3:01:45 PM
VN-INDEX 636.65 +4.62/+0.73%
Real-time chart
Top 5 Actives
Top 5 Gainers
Top 5 Losers
My Favorite Quotes
Your most recently viewed tickers will automatically show up here if you type a ticker in the Get Quotes box on the top of the page.
Company Research
Type in the symbol above for thorough background information, key statistics and financial information.
Stock Sectors
We continuously improve our services, here are the latest updates...
Portfolio
Allow you to monitor a customised group of securities. You can set up multiple Portfolios to help you better manage your investments.
Trigger Alerts
Get up-to-date alerts delivered directly to your email address.
Stock Screener
Allow you to filter the market and find exactly what sort of company you are looking for.
Live Terminal
Get instant access to FREE REAL-TIME streaming quotes for hundreds of stocks from HOSE, HNX and UPCOM exchanges.