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Challenges In Removing The Interest Rates Gap Among Banking Groups

Challenges In Removing The Interest Rates Gap Among Banking Groups

Thursday 16, 01 2020
The difference between 6-month and under-12-month interest rates is currently at the highest level, with banks applying only 5.8% / year, but some up to nearly 8% / year.

The current situation

According to the weekly monetary market report released by Investment Analysis & Consulting Center of SSI Securities Company, during the week to December 13, the liquidity on the interbank has been improved thanks to the increasing VND supply from major commercial banks and the SBV continual net inject of VND 1,627 billion via OMO.

As a result, interest rates on the interbank gradually decreased, ending the week at 3.68% / year for the overnight term (down 34 basis points compared to the previous week) and 3.9% / year for the 1-week term (down 20 basis points).

On the market 1, there was no significant adjustment, the deposit interest rate still fluctuated in the range of 4.1-5.0% / year for terms of less than 6 months, 5.5-7.5% / year for terms of 6 to less than 12 months and from 6.4 to 7.9% per annum for terms of 12 and 13 months. Interest rates for terms of 6 months and above are still high so commercial banks' deposits have grown well in the last 4 months and increased the proportion of medium and long-term deposits in the deposit structure.

According to data from the State Bank, the proportion of short-term capital for medium and long-term loans for the whole system has decreased from 28.4% at the end of 2018 to 27.3% at the end of September 2019. This rate is in the roadmap to reduce to no more than 30% in all banks on October 1, 2022 (according to Circular 22).

The estimation of the analysts

SSI analysts believe that, after the current peak period, interest rates may decline slightly but there will still be quite large differences among banking groups.

In fact, the interest rate gap between banks has cooled down compared to the time before November 19 - when the State Bank lowered the ceiling interest rate for less than 6-month terms, but it was still very large.

Specifically, in the group of small commercial banks or large banks with traditionally high-interest rates such as SCB, the interest rate for long terms of 12 months or more is still more than 8% / year, while in other big banks, especially in the State-owned commercial group (SOBs) consisting of Vietcombank, VietinBank, BIDV, Techcombank ... the highest interest rate is less than 7% / year, with the difference of more than 1%.

For 6-month to less than 12-month terms, the interest rate difference is the largest. There are banks still applying interest rates over 7% / year, even nearly 8% / year.

​Only the interest rate of fewer than 6 months is a negligible difference when the State Bank imposes the ceiling interest rate of 5% / year. Current deposits of 1 month to less than 6 months are common at 4.5-5% / year. Interest rates for term from 1 to 6 months of banks

Interest rates for term from 1 to 6 months of banks
Interest rates for term from 1 to 6 months of banks

Keep reading: High-interest Rates Strongly Attract Deposits​

Categories
Banking

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