Four commercial banks with state capital have simultaneously reduced deposit interest rates, while interbank interest rates also continue to fall to record lows. Meanwhile, the exchange rate has not stopped "heating" up.
Credit congestion, banks have excess money
Despite the State Bank's (SBV) efforts to issue treasury bills with net absorption for 9 consecutive sessions, liquidity in the banking system is still surplus.
By the end of last week, the State Bank had withdrawn a total of VND 130,000 billion through 9 consecutive T-bill issuance sessions (from March 11-21). Although the operator continuously issued T-bills to absorb excess liquidity, it did not seem to have improved significantly, the T-bill interest rate decreased from 1.4%/year in the first sessions, to only 1. .32% in last week's session.
In the interbank market, interest rates have also fallen to record lows. Accordingly, with the overnight term, which is the key term accounting for nearly 90% of transactions in this market, the interest rate continues to decrease to only 0.13%/year, equivalent to the lowest area in the surplus period. Excess liquidity in the last two quarters of 2023 and early 2024.
Similarly, other periods also decreased sharply compared to the level recorded 1 week earlier: the 1-week period decreased from 1.67% to 0.48%; the 2-week term decreased from 1.75% to 1.18%; the 1-month term decreased from 1.88% to 1.58%.
In the residential market, deposit interest rates also established a new "bottom" when in just a few days, four commercial banks with state capital simultaneously reduced interest rates by 0.1 - 0.2 percentage points.
Accordingly, at all 4 banks, there is no longer a profit rate of 5%/year. In particular, VietinBank reduced the maximum savings interest rate from 5%/year to only 4.8%/year, applicable for terms of 24 months or more. For other terms, VietinBank depositors can only enjoy the following interest rates: 1 - 2 month terms reduced to 1.7%/year; 3 - 5 month term is 2%/year; 6 - 11 month term is 3%/year; 12 - 23 month term is 4.7%/year.
At BIDV, after the previous reduction, the deposit interest rate is now equivalent to VietinBank's for all terms.
Meanwhile, Agribank's interest rate is even lower. Specifically, the 1-month term decreased from 1.7%/year to 1.6%/year; 3 - 5-month term decreased from 2%/year to 1.9%/year; Interest rates for terms of 6 - 11 months are maintained at 3%/year. Meanwhile, 12-month and 13-month term interest rates were reduced by Agribank from 4.8 %/year to 4.7 %/year; 24-month terms decreased from 4.9 %/year to 4.7 %/year.
After a reduction in Vietcombank in January, the highest interest rate at this bank is only 4.7%/year, for terms of 12 months or more.
Not only big4 but many other large-scale joint stock commercial banks also further reduced interest rates in the second half of March. Sacombank can be mentioned when this bank sharply reduced deposit interest rates by up to 1%/year for many terms. on March 21 last. The highest rate that customers enjoy when depositing money at this bank is only 5%/year, down 1%/year compared to before, applicable for terms of 36 months or more. With shorter terms, the maximum interest rate at Sacombank is only 4.8 %/year....
Since the beginning of March, the market has recorded about 20 banks reducing interest rates, showing that most of the system has excess money and credit is still clogged.
Exchange rate pressure is still great
Falling VND interest rates widen the interest rate difference between USD and VND, thereby putting more pressure on the exchange rate.
In fact, USD exchange rates at banks have increased to record highs in recent days. According to records from last weekend's session, the USD buying-selling price at Vietcombank, the bank with the largest foreign currency transaction scale in the system, was listed at 24,580 - 24,950 VND, the highest level in the history of this bank and has been an increase of about 2.2% compared to the beginning of the year.
At other banks, the USD selling price is currently listed in the range of 24,940 - 24,960 VND, an increase of about 1.8 - 2.2%. On the free market, the exchange rate has increased by nearly 4%.
Dr. Can Van Luc, Chief Economist of BIDV also pointed out some reasons for the recent increase in domestic exchange rates. First, the USD strengthened (up 2%) as the US economy recovered impressively, not even in recession but growing about 2.5% in the past year. The Fed is expected to lower interest rates more slowly than initially expected. Therefore, the interest rate difference between the USD and other currencies remains high.
Second, the beginning of the year is the time when some FDI enterprises repatriate profits. This is a seasonal factor and has the effect of increasing the demand for foreign currency trading. Third, there is the phenomenon of foreign currency speculation when exchange rates fluctuate.
However, this expert believes that the exchange rate will cool down in the second half of this year when the Fed reduces interest rates. The amplitude of exchange rate fluctuations this year is forecast to not be large.
Regarding the continuous net withdrawal of the State Bank, Dr. Luc believes that this is killing two birds with one stone, both reducing the system's excess liquidity and supporting the exchange rate.
With the current exchange rate and credit developments, according to Mr. Luc, the State Bank does not need and should not further reduce operating interest rates. If it continues to decrease, the USD/VND interest rate difference will widen, putting even more pressure on the exchange rate.
(Theo An ninh Thu do)