Liquidity problems behind high bank interest rates: experts
Commercial banks in Vietnam have increased deposit interest rates to 9-10% per annum amid inflationary pressure due to market liquidity problems, experts said.
The country's central bank - the State Bank of Vietnam (SBV) - raised its interest rates twice in September and October to curb inflation, support economic recovery, and adapt to domestic and foreign market movements.

Vietnamese banknotes. Photo by The Investor/Trong Hieu.
Almost all commercial joint stock banks in the country have so far placed their deposit rates higher than 9% per annum, while the Big-4 group, including wholly state-owned Agribank, and the trio BIDV, Vietcombank and Vietinbank with the state as majority shareholder, offer lower rates.
The SBV will keep its 14% cap on the banking system's credit growth for this year, according to an announcement on Tuesday, while businesses are facing a credit crunch. As of the time of the announcement, credit growth is at 11.5%, the central bank said.
Therefore, commercial banks’ interest rate race indicates that lenders, which are limiting lending, may face some liquidity problems and non-performing loan (NPL) issues, according to banking expert Nguyen Tri Hieu.
According to the SBV, the NPL ratio in Vietnam’s banking system as of July this year was 5.41%, which means banks need to promote deposits to ease old debts.
In terms of liquidity in Vietnam’s financial markets, Hieu said both the stock and corporate bond markets have been experiencing low liquidity, resulting in some liquidity difficulties in the banking system.
On October 8, the Ministry of Public Security announced Truong My Lan, chairwoman of Ho Chi Minh City-based property developer Van Thinh Phat was arrested on charges of illegally issuing bonds to raise trillions of Vietnamese dong (tens of millions of U.S. dollars) from investors during the 2018-2019 period. Then, Saigon Commercial Bank, or SCB, in which the property group has some stakes, started to see depositors rush to withdraw their savings.
According to Hieu, banks often utilize inter-bank loans but after the incident, they may not trust each other in using the loans. Therefore, they must rely on savings from depositors or SBV loans, while the central bank seeks to curb inflation. “Therefore, banks have to increase their deposit rates,” Hieu noted.
“The race may last until the end of this year or early next year. The situation is expected to become better after the Lunar New Year holidays in late January, depending on government measures,” he added.
Economist Le Xuan Nghia, a member of the National Financial and Monetary Policy Advisory Council, said the Vietnamese economy is facing a major problem - low liquidity.
So far this year, the central bank has sold about $26 billion to reclaim about VND600 trillion (the amount of dong pumped into the economy by the SBV is limited). Additionally, about VND900 trillion ($36.33 billion) in government public funding lies idle, according to the SBV’s balance sheet.
The central bank holds a great deal of money, which needs to be put it into circulation, said the economist.
He added that the government has sufficient tools to put that sum back into circulation to help drag down current high deposit rates in order to cut capital costs for both enterprises and residents, but the task requires smooth coordination between policymakers and regulators.
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