Hanoi (VNA) – Interest rates for different terms from now to the end of 2017 arelikely to decline by 0.5–1 percent from 2016 thanks to positive signals fromthe stock and property markets, macro-economic indexes, the Government’sattentions to businesses and banks’ strategies for attracting new clients.

Lawyer Bui Quang Tin from the businessadministration faculty of the Banking University of Ho Chi Minh City made theprediction at the Vietnam Economic Forum 2017 held by the Party CentralCommittee’s Commission for Economic Affairs in Hanoi on June 27.

There will be more challenges to stabiliseinterest rates in the remaining months of 2017 compared to 2016 as inflationand interest rates are expected to increase because the US Federal Reserve isprojected to make at least three interest rate hikes this year, he said.

Also, bad debts haven’t been thoroughly settled,causing a big barrier to the lowering of interest rates, Tin said, adding thatthe fact will pose bigger pressure on deposit rate hikes.

In the first quarter of 2017, deposit rates fordifferent terms rose by several tens of basis points at some small and medium-sizedbanks. However, the whole banking system’s deposit rates basically did notchange much from the year’s beginning.

🔴[Banking sector sees 6.53 percent in credit growth]

Deposit rates for under-six-month terms werekept below the ceiling rate of 5.5 percent per annum, mostly between 4.3–5.5percent. The rates were about 5.3–7 percent for the terms of from six months tounder 12 months, and 6.5–8 percent per annum for the terms of 12 months upwards.

Meanwhile, lending rates were relatively stable.In prioritised areas, the rates ranged between 6–7 percent per annum for shortterms and 9–10 percent for medium and long terms. The respective rates were 6.8–9percent and 9.3–11 percent per annum for loans in normal production andbusiness areas.

The recent augmentation of deposit rates at somebanks is attributed to their need to increase capital and meet capital adequacyratio requirements. The shortage of liquidity, high inter-bank interest rateswhich have hampered some banks’ access to capital sources in the inter-bankmarket, and better credit growth were also reasons behind banks’ move to attract moredeposits.

However,the pressure to increase deposit rates only occurs at some banks, and theliquidity shortage did not happen at major banks. The State Bank of Vietnamstill has room to regulate the market and ensure low interest rates to supportgrowth.

To stabilise lending rates, Tin suggested thatthe banking system should step up settlement of bad debts and restructuring of creditinstitutions. The difference between interest rates for loans and deposits inUSD and VND should also be kept at reasonable levels, he added.-VNA