Banks in sync to cut deposit, lending rates

The central bank's shift towards guiding interest rates rather than imposing rigid measures is underscoring a more flexible, market-responsive approach shaped by liquidity dynamics, capital flows, and mounting domestic and external pressures.

- By Hazy Tran

On April 9, newly appointed State Bank of Vietnam (SBV) Governor Pham Duc An chaired a meeting with 46 commercial banks, where all participating lenders reached a consensus to cut both deposit and lending rates, highlighting system-wide alignment in easing funding pressures on the economy.

The SBV announced at a briefing on its first-quarter banking performance on April 14 that interest rates are declining broadly across the system, with around 26 commercial banks simultaneously cutting listed rates across both branch-based and digital channels, according to Pham Chi Quang, director general of the SBV's Monetary Policy Department.

"Most adjustments have been concentrated on tenors above six months, in line with the SBV's policy direction. The reduction in deposit rates has contributed to lowering the overall funding cost base, thereby creating a spillover effect that enables further reductions in lending rates to support the economy," stated Quang. "We expect that the continued transmission of lower deposit rates will help commercial banks reduce input costs, providing additional room to further cut lending rates and support economic growth."

Following the adjustments, a new rate landscape has quickly formed, with short-term deposits at 4-4.7 per cent per annum, 6-12 month tenors at 6-7 per cent, and rates above 7 per cent now largely confined to a few banks and longer maturities.

Among state-owned banks, Vietcombank reduced 24-month deposit rates by 0.5 per cent per annum, while VietinBank, BIDV, and Agribank cut rates by 0.5 per cent per annum for tenors of 24 months and above.