Deposit interest rates have dropped, when will it be the turn of lending interest rates?

Economist Dr. Nguyen Tri Hieu said that there must be a delay from when banks lower deposit interest rates to when they lower lending interest rates, the fastest time would be 3 months. He compared each bank's currency basket to a basket of rice, containing both new and old rice.

“Old rice is the money mobilized before with a higher interest rate, while new rice is the capital mobilized since the day the interest rate was lowered. In that common rice basket, there is still a part mobilized with a high interest rate. Therefore, to reduce the lending interest rate, it takes a certain amount of time,” Mr. Hieu said.

Mr. Hieu further emphasized that in order to bring low-interest cash flow to the market and contribute to economic development, banks themselves must sacrifice part of their profits. Banks will certainly be under pressure when it becomes more difficult to attract idle cash flow from people.

“If deposit interest rates are low, people will look to see if there are any more attractive investment channels than bank deposits. And they may look to some fast-growing, profitable sectors such as stocks, real estate, and especially gold, which is forecast to continue to fluctuate strongly in the near future,” he analyzed.

Meanwhile, Dr. Le Duy Binh, Director of Economica Vietnam, said that whether banks will reduce lending interest rates in the coming time depends on input interest rates and operating costs and other expenses of the bank.

“To reduce lending interest rates and push cash flow into the market, banks must reduce input interest rates and operating costs to some extent while still helping them cover operating costs and make acceptable profits,” said Mr. Binh.

Therefore, when the deposit interest rate decreases significantly, the lending interest rate is likely to decrease as well, of course after a certain period of time. According to him, the deposit interest rate has only decreased for certain terms and has not yet become a wave in the entire banking system. Therefore, the possibility of an immediate decrease in lending interest rates is unlikely. Normally, it takes at least 2-3 months for banks to ensure a balance between input and output costs, and not to compensate for losses.

Mr. Binh also stated that there are many other difficult factors affecting the reduction of lending interest rates, including the increasingly high operating costs of banks such as: labor costs, information technology investment, operating costs... If these factors are not reduced by banks, they will be barriers to the process of reducing lending interest rates.

With the current outstanding debt of about 16 million billion VND, if the interest rate is reduced by only 1%, it will be equivalent to billions of USD in interest costs for businesses. "This will have a large and positive impact on businesses. However, on the other hand, we also need to consider the interests of depositors and businesses with idle capital because they also need to ensure that the interest rate is attractive enough to deposit money in the bank," Mr. Binh further analyzed.

Responding to the question of when lending interest rates will be lowered, representatives of several banks affirmed that lending interest rates are currently at appropriate levels and that banks have followed the instructions of the Government, Prime Minister and State Bank.

"Currently, our bank's lowest lending interest rate is 6.5%/year, with flexible loan terms of up to 60 months. This is a preferential interest rate for production and business customers with collateral.",said a representative.

This person also affirmed that they will continue to research and balance time to continue cutting costs, lowering deposit interest rates, as a premise to reduce lending interest rates. "We need to calculate a series of operating costs such as labor costs, information technology investment, operating costs... All of which require time and process," said the bank representative.

At the workshop "Using capital effectively to promote economic growth" on February 28, Deputy Governor of the State Bank Dao Minh Tu also pointed out the fact that many banks are mobilizing 9 dong but lending up to 10 dong, meaning using both their own capital and re-lending capital from the State Bank to disburse and support growth.

Mr. Tu explained that there are dozens of banks in the market and the interest rates cannot be exactly the same. The reason why some small banks have recently increased interest rates is because they need capital to disburse credit.