Interest rates down, cash flow gets stuck
VietNamNet Bridge – Commercial banks have quietly reduced the depositinterest rates because of the low demand for loans. Investors have been in adivided mind as to where to pour money to since all the investment channelsremain unattractive.
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Cash flow gets stuck
Big changes have been occurring in the monetary market when commercial bankshave unexpectedly slashed the deposit interest rate sharply by one percent.
A banker said the liquidity is now strong, while the capital keeps flowing intobanks, the demand for loans of the national economy does not increaseaccordingly. The slow lending has forced banks to lower the deposit interestrate to prevent the capital abundance and help push up lending, once the lendinginterest rate goes down.
The banker said he does not think that the lower interest rates would be athreat to the banking system’s liquidity. He believes that the deposit wouldkeep flowing into banks, because depositing remains the better choice than otherinvestment channels like securities, real estate, gold or dollars.
Most banks have reported the steady increase of short term deposits (less than12 month term).
A report by the State Bank of Vietnam showed that the mobilized capital hasincreased again since late January 2013. The total capital mobilized by February28, 2013 had increased by 2 percent over the end of 2012, which was two foldshigher than the same period of the last year.
Meanwhile, the outstanding loans in February had increased by 0.26 percent afterit reduced by 1.23 percent in January. By the end of February, the outstandingloans had decreased by 0.28 percent over the end of 2012, or lower than the 1.88percent decrease in the first two months of 2012.
Not only the people, who want to invest in safe investment channels, but ventureinvestors also decide to deposit money at banks at this moment. As the realestate market remains frozen, they would rather leave their money at banks andwait for their opportunities.
The short term interest rates offered by commercial banks now hover around 7.8-8percent per annum, while longer term10-11 percent. If the inflation rate iscurbed at less than 7 percent this year as targeted by the State Bank,depositors can be sure that they would get real profits and preserve theircapital.
Interest rates go down further?
Experts admitted that the interest rate has gone down, but have warned bankersthat if the interest rates reduce further, the cash flow to banks would stopbecause the lower interest rates would not attract investors.
An official of the State Bank of Vietnam also said that with the inflation rateexpected to be between 6-8 percent and the current short term deposit interestrate of 8 percent, there is no high possibility of slashing the interest ratesfurther.
Dr. Vu Dinh Anh, a well-known economist, believes that banks still can reducethe lending interest rates further while no need to slash the deposit interestrate. He said that with the current deposit interest rate of 8 percent perannum, the lending rate should be reduced to 11-12 percent per annum, believingthat the rate would be bearable for businesses.
Big changes have been occurring in the monetary market when commercial bankshave unexpectedly slashed the deposit interest rate sharply by one percent.
A banker said the liquidity is now strong, while the capital keeps flowing intobanks, the demand for loans of the national economy does not increaseaccordingly. The slow lending has forced banks to lower the deposit interestrate to prevent the capital abundance and help push up lending, once the lendinginterest rate goes down.
The banker said he does not think that the lower interest rates would be athreat to the banking system’s liquidity. He believes that the deposit wouldkeep flowing into banks, because depositing remains the better choice than otherinvestment channels like securities, real estate, gold or dollars.
Most banks have reported the steady increase of short term deposits (less than12 month term).
A report by the State Bank of Vietnam showed that the mobilized capital hasincreased again since late January 2013. The total capital mobilized by February28, 2013 had increased by 2 percent over the end of 2012, which was two foldshigher than the same period of the last year.
Meanwhile, the outstanding loans in February had increased by 0.26 percent afterit reduced by 1.23 percent in January. By the end of February, the outstandingloans had decreased by 0.28 percent over the end of 2012, or lower than the 1.88percent decrease in the first two months of 2012.
Not only the people, who want to invest in safe investment channels, but ventureinvestors also decide to deposit money at banks at this moment. As the realestate market remains frozen, they would rather leave their money at banks andwait for their opportunities.
The short term interest rates offered by commercial banks now hover around 7.8-8percent per annum, while longer term10-11 percent. If the inflation rate iscurbed at less than 7 percent this year as targeted by the State Bank,depositors can be sure that they would get real profits and preserve theircapital.
Interest rates go down further?
Experts admitted that the interest rate has gone down, but have warned bankersthat if the interest rates reduce further, the cash flow to banks would stopbecause the lower interest rates would not attract investors.
An official of the State Bank of Vietnam also said that with the inflation rateexpected to be between 6-8 percent and the current short term deposit interestrate of 8 percent, there is no high possibility of slashing the interest ratesfurther.
Dr. Vu Dinh Anh, a well-known economist, believes that banks still can reducethe lending interest rates further while no need to slash the deposit interestrate. He said that with the current deposit interest rate of 8 percent perannum, the lending rate should be reduced to 11-12 percent per annum, believingthat the rate would be bearable for businesses.
According to the HCM City Business Association, small and medium enterprises nowhave to pay the sky high interest rates of over 15 percent for short term loans.Only a few big businesses can access bank loans at 10-12 percent per annum.
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