HO CHI MINH CITY: Despite interest rate cuts by commercial banks, deposits by retail customers continue to increase due to a lack of alternative asset classes.

The State Bank of Vietnam reported that overall bank deposits were worth 12.68 quadrillion dong (US$522.4bil) as of the end of September, 7.3% up for the year.

Retail deposits rose by 10% to 6.45 quadrillion dong, the highest since 2018.

In October last year, interest rates soared to over 12% due to the Saigon Joint Stock Commercial Bank (SCB) scandal, but have since decreased to around 5%.

There was a run on the SCB following the arrest of Truong My Lan, chairwoman of Van Thinh Phat Group, who had control over the lender as she held a controlling stake since a merger in 2012.

The central bank placed the lender under “special control” to head off a contagion that could affect the entire banking industry.

A supervisor at an HDBank branch in Ho Chi Minh City’s District 4, who asked not to be named, told Vietnam News that “most banks now have excess liquidity due to low lending”.

Analysts said individual depositors are not expected to move to other asset classes.

Despite the dip in interest rates, bank deposits have kept rising, resulting in a surplus of over one quadrillion dong.

This has led to the central bank issuing treasury bills to mop up liquidity and ensure there is no significant impact on interest rates.

Credit growth for the year was only 7.4% as of the end of October, or just half the year’s target of 14%.

Analysts now expect credit growth of only around 12% since loans to property developers and mortgages, which make up 70%, have plummeted.

Exports and industrial production are also facing difficulties, leading to a further decrease in demand.

This is a concern for the economy’s recovery in general, experts warned.

Prime Minister Pham Minh Chinh has stressed the importance of increasing credit access and removing difficulties faced by businesses.

He has instructed the central bank to employ flexible and efficient monetary policies to promote growth and ensure the safety of the credit system.

State Bank of Vietnam governor Nguyen Thi Hong remains optimistic that with the various measures implemented to stimulate consumption and explore new export markets, credit growth will pick up by the end of the year.

 - ANN