There are embryonic signs of a new interest rate race among commercial banks, which have been trying to raise the deposit interest rates to improve their liquidity.
Ceiling interest rate broken
While most commercial banks complain about the capital abundance and the slow credit growth rate, they still have been launching a lot of marketing programs to encourage people to deposit money at their banks.
Dau tu newspaper has found out that “special interest rates” still have been offered to the VIP clients, who deposit VND10 billion or more. The “special interest rates” are understood as the rates which are higher than the ceiling rate, now at 7.5 percent set up by the State Bank of Vietnam.
President of Agribank, one of the biggest banks in Vietnam, also said the liquidity of the banking system is not profuse as reported, especially after the State Bank began applying the drastic measures to slash the deposit interest rates.
The deposit inflow to commercial banks has slowed down in both urban and rural areas. This has forced banks to raise the deposit interest rates in order to attract capital.
Agreeing with Bao, Phan Duc Tu, General Director of the Bank for Investment and Development of Vietnam BIDV, said though banks have agreed on the central bank’s policy on lowering interest rates, some banks still have quietly mobilized capital at high interest rates.
Some commercial banks have recently suggested lowering the deposit interest rates to 5 or 6 percent per annum. However, the suggestion is thought to be unfeasible because of the weak liquidity of banks.
“Some problems have appeared on the monetary market,” Bao said. “If the interest rates reduce further, though slightly, this would make the market distorted.”
Governor of the State Bank of Vietnam Nguyen Van Binh has also admitted that though the banking system’s capital has become more profuse, the strong liquidity has not been obtained by all banks. Therefore, if the central bank slashes the interest rate further, some small banks would fall into big difficulties.
Therefore, Binh said that the ceiling deposit interest rate would be kept unchanged until the end of the year, or it would be reduced very slightly.
Credit quality still worrying
In order to obtain the 12 percent credit growth rate in 2013, commercial banks need to obtain the 9 percent growth rate more in the second half of the year, which is really a difficult task.
President of Vietinbank — Pham Huy Hung, has noted that the credit quality has not been improved yet. Though the bad debt ratio has decreased, the credit quality has not increased.
Bankers have also said that they can push up lending, but there are latent risks in loaning because of the degrading businesses’ health.
Vietcombank’s General Director — Nguyen Phuoc Thanh, also said the number of goods businesses, marked as “++”, has decreased sharply. While Vietcombank continues pouring capital into the priority sector, it has noted that the bad debts in the sectors have increased rapidly due to the high inventories.
While commercial banks find it difficult to increase the credit growth, Tien Phong Bank has proposed the State Bank to allow it to have the credit growth rate higher than 12 percent with the promise to ensure the high credit safety.