A low-interest rate environment in long term could make capital available for other investment channels, so banks are under pressure to readjust their savings mobilization rates to better attract idle capital.
The Central bank has lowered its interest rate cap three times by a combined of 1.5-2 percentage points per annum, which is the largest cut in the region.
The banking system has been providing support for 590,000 customers, mainly in forms of debt restructuring or freezing and waiving debt payment with outstanding loans worth over VND1,000 trillion (US$43.31 billion).
Given abundant liquidity and low demand for credit, banks are offering attractive loans during the year-end period.
The decrease in short-term deposit rates at commercial banks was mainly driven by the excess liquidity when credit growth was slow at only 5.12% year-on-year as of September 22.
Lower interest rates of deposit of required reserves and deposit of non-required reserves are expected to encourage commercial banks to inject more cash into the economy.
Vietnam’s central bank is willing to increase the credit growth limits for banks from now until the end of the year to support economic growth.
Credit demand in Vietnam is expected to stay low in the foreseeable future as the Covid-19 pandemic continues to be complicated globally, said a central banker.
With fewer concerns about currency and external stability, Vietnam’s central bank is likely to be more comfortable with delivering interest rate cuts to support growth.
Lower policy rates would enable commercial banks to cut interest rates in a more sustainable way, which in turn contribute significantly to economic recovery, said a central bank official.