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Deposit rates declined after directives from the State Bank, but the market’s average deposit rate remains relatively high, above 8% per year for a 12-month term. Experts say the slower pace of rate cuts reflects internal pressures within the banking system, ranging from liquidity constraints to the structure of cash flows.
Dr. Dang Ngoc Duc, Vice Rector of the Institute of Financial Technology at Nam University, said the current situation shows a gap between policy signals and market liquidity. He noted that one core reason deposit rates are falling slowly is liquidity: when credit growth outpaces deposit mobilization, banks must maintain attractive rates to attract funds. In that context, the supply-demand dynamics of the capital market mean the “price of capital” cannot fall quickly when money supply is constrained.
With borrowing demand recovering—particularly from the corporate sector—many banks face stronger competition to retain depositors. The pressure is more pronounced for smaller banks, which have more limited access to low-cost funds, making rate cuts more difficult than for larger banks.
According to Dr. Duc, banks are not in a position to sharply reduce nominal deposit rates if they want to keep depositors’ yields attractive. If deposit rates fall too much, funds may leave the banking system to seek other investment channels, which would increase liquidity pressure.
He also pointed to high funding demand in the economy. Enterprises need capital to resume production and expand investment after difficult periods, while household funds do not rise accordingly and may instead flow into assets such as gold, real estate, or other investment channels.
As a result, banks adopt a “price-maintenance” stance for deposits to balance funding resources. If rates drop too quickly, the risk of maturity mismatch and liquidity problems can increase, especially because mid- and long-term loan demand remains sizable.
“It can be said that the request to reduce rates is an administrative directive. In reality, macroeconomic factors and capital supply-demand are the main reasons rates do not fall sharply,” Duc said.
Lawyer Truong Thanh Duc, Arbitrator at the Vietnam International Arbitration Centre, said recent rate movements underline the funding challenge facing the banking system. He noted that rather than placing long-term deposits to lock in rates, many savers prefer short-term 3–6 month terms to remain flexible amid market volatility.
This preference changes the banks’ funding structure. At the same time, demand for mid- to long-term lending remains strong, creating a mismatch between deposit maturities and lending needs.
When deposit rates decline, banks’ input costs can also fall, which may allow lower lending rates. However, reductions are not uniform in practice.
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