Enterprises expected a considerable interest rate cut in the time to come
Modest lending interest rate cut
After the Bank for Investment and Development of Vietnam (BIDV) and the Bank for Foreign Trade of Vietnam (VietComBank), Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank) was the third institution that announced to lower lending interest rates by 0.5% per year.
Vietinbank is applying the lowest yearly lending interest rates, of 16%, for agricultural ventures, with those for production are around 17%.
Earlier, BIDV has slashed its lending interest rate to a minimum of 14.5% per year. Its lending interest rate peaked at 17.5% per year.
Vietcombank has lowered its short-term lending interest rate for exports to 16% per annum while the short-term lending interest rates for production is 16.5% per year and for trade and service reaches 17% per annum.
Despite the modest cut among a few big banks, the new lending interest rates are considerably lower than the 19.5-20% interest rate applied in late 2011.
In the next few months when the banking liquidity is heightened, more and more banks will lower their interest rates.
Deposit interest rate depends on inflation
In late 2011, Governor of the State Bank of Vietnam (SBV), Nguyen Van Binh, said that if the inflation rate is brought down from 8% to 8.5% this year, deposit interest rates could decrease to around 10%.
While the consumer price index continues to fluctuate, the way to get lower deposit interest rates is dependent on many factors, especially cooling, he added.
The inflation rate had dropped to 17.27% in January 2012 from a record high of 23.02% in August 2011.
The rate is forecast to slightly increase by 1.5% in February, and then gradually decrease to around 0.5% per month in the following months.
Many experts expect that the rate may be tamed at 12% in April and to less than 10% by the end of the second quarter of this year.
With such an expected falling trend in the inflation rate, interest rates may follow suit but at a lower pace due to the dependence on banking liquidity and level of bad debts.
According to a recent report by BIDV Securities Company, this year’s bad debts may be more serious than the 2008-2009 period as a result of the nearly frozen real estate market.
"As long as the real estate market remains in slow-motion and banking liquidity is still low, it will take time to lower interest rates. By the end of 2012 may be cool down,” BSC noted.
However, experts continue to worry about the pace of interest rates lowering, which start to wear on the psychology of people. In order to strengthen confidence, policy makers may take methods to improve the situation, including slashing the cap on deposit interest rate by 1% from current 14% per year.