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In the first months of 2024, banks continuously reduce their input interest rates to margin to the economic situations. However, many banks are adjusting to increase interest rates to attract savings flows which are growing in lower rate than expected.

Many banks have raised deposit interest rates to improve their capital source capacity and meet capital needs in the near future. In the picture: Customer consultation is carried out at Binh Duong branch of Vietcombank

Deposit mobilization at low growing rates

In the first months of 2024, the currency market continuously recorded a decrease in deposit interest rates. Many credit institutions have adjusted their deposit interest rates downwards since the State Bank of Vietnam decided to reduce a series of policy interest rates. Faced with the general fluctuations of the currency market, the capital mobilization activities of commercial banks are facing many challenges.

Specifically, as of the end of June 2024, the total capital mobilization at Binh Duong branch BIDV only increased by about 2% compared to the beginning of 2024.

"This is a low growth rate compared to the target of increasing mobilization by 10-14% this year," said Mr. Tran Ngoc Linh, Director of Binh Duong branch BIDV.

At Binh Duong branch Vietcombank, the amount of savings also decreased. Mr. Nguyen Thai Minh Quang, Director of Binh Duong branch Vietcombank, said that in the current difficult economic situation, people tend to withdraw capital to serve for unexpected expenses or invest in other assets such as gold, foreign currency or other channels. For organizational customers, previously the economic situation was stable, there were many orders, and businesses had both deposit balances at the bank and credit debts.

Currently, the situation is completely different as businesses have reduced their borrowing scale and prioritize using their own capital for production. As a result, the balance of deposits by businesses has also decreased. The target for capital mobilization is currently decreasing significantly, especially in the FDI business sector, having caused the total mobilized capital of Binh Duong branch Vietcombank to decrease by about 2% compared to the beginning of 2024," said Mr. Nguyen Thai Minh Quang.

Not only the two mentioned banks, but also in other commercial banks, the mobilization of capital is also developing similarly, causing the total mobilized capital in the province to increase at a lower rate compared to the same period last year.

Capital magnet to meet the demands

Bank leaders said that the deposit situation of individuals and businesses has declined in the first 6 months of 2024 due to continuously decreasing deposit interest rates, which has caused idle money to flow into investments in gold and real estate. At the same time, while credit growth is slow, banks also do not have the motivation to mobilize capital at any cost as in the previous period. Low capital mobilization needs have caused banks to continuously reduce deposit interest rates to record lows in the first 5 months of this year.

According to bank leaders, the developments in the market in June showed that investment channels such as gold are being controlled by the State Bank, while other investment channels such as real estate are difficult to increase significantly. At the same time, the production activities of businesses have shown signs of recovery, which is the reason why the mobilization interest rates of most commercial banks are increasing again.

Since the beginning of July, there have been 3 banks that have increased their savings interest rates, namely SeABank, NCB, and Eximbank. Prior to that, in June, there were 23 commercial banks that raised their deposit interest rates. A month ago, most banks listed their 6-month term deposit rates below 4.9% per year, but now many banks have listed rates above 6% per year, mainly for longer terms. For the 12-month term, most private banks have been offering deposit interest rates ranging from 5% to 6% per year.

Mr. Nguyen Thai Minh Quang said that as we enter the second quarter of 2024, the disbursement and borrowing needs of businesses that are progressing well have increased, leading to positive signs of credit growth returning since the end of May. Therefore, banks may have to increase deposit interest rates to balance the mobilized capital and lending flows.

Mr. Ho Nam Tien, CEO of LPBank, said that after a period of maintaining low deposit interest rates at the beginning of the year, LPBank has adjusted and increased the deposit interest rates to balance the cash flow with the growing lending activities in the first half of the year. According to Mr. Ho Nam Tien, by the end of May, the bank's credit growth has reached over 10% and is expected to increase by 15% for the whole year according to the target set by the State Bank. Therefore, the banking system also needs capital inflows to achieve the business targets set for the entire year of 2024.

Reported by Thanh Hong – Translated by Vi Bao