Hanoi (VNA) - After two weeks of lowering lendinginterest rates for short-term VNDloans following the State Bank of Vietnam (SBV)’s cue, severalcommercial banks have reduced their deposit interest rates.

On July 25, the Vietnam Export-Import Commercial Joint StockBank (Eximbank) lowered its annual interest rates for under-six-month depositsby 0.1-0.2 percentage points.

Accordingly, the rate for one-month deposits was reduced from4.7 percent to 4.6 percent, two-month deposits from 4.9 percent to 4.8 percent,three-month deposits from 5.1 percent to five percent and six-month depositsfrom 5.8 percent to 5.6 percent.

The Vietnam Prosperity Commercial Joint Stock Bank (VPBank) alsoadjusted interest rates downwards for deposits of one to three-month terms.

Some other banks were quoted by Nguoi Lao Dong (TheLabourer) as saying they are following market movement and could changeinterest rates at any time.

Eximbank General Director Le Van Quyet admitted that the bankhad reduced its lending rates but found difficult to lend while it still had topay interest for deposits, thus it had to lower its saving rates to ensurebusiness efficiency.

According to SBV’s HCM City branch, in the first six months ofthe year, total amount of deposits mobilised by commercial banks in the cityreached 1.8 quadrillion VND (80 billion USD) while total lending was only 1.63quadrillion VND, proving that commercial banks have abundant liquidity.

Do Minh Toan, General Director of the A Chau Commercial JointStock Bank (ACB), said enterprises’ demand for capital in the next three monthswill likely not go up, adding that the bank has to maintain average short-termdeposit interest rate at 4.9 percent to ensure its interest income.

Declining interest rates is a positive signal for the economy,banking expert Nguyen Tri Hieu said, adding that only commercial banks whichhave excess capital have grounds to adjust deposit interest rates downwards.

Earlier, on July 7, SBV issued a decision to cut annualrefinancing interest rate, rediscount interest rate and overnight interest rateapplied to electronic inter-bank payments, and the rate of loans to offsetcapital shortage in clearing of payments between SBV and domestic banks by 0.25percentage points.

The maximum annual short-term interest rate for loans in VNDby credit institutions to meet customers’ demand for capital in someprioritised sectors has also been cut by 0.5 percentage points from 7 percent.

Following the decision, commercial banks started announcinglending rate cuts. However, experts predicted that banks which have cutthe rates might face a further decline in the net interest margin (NIM) if theydo not lower deposit interest rates accordingly.

NIM is the ratio of net interest income to invested assets, withnet interest income being the difference between interest income and interestexpense.-VNA