Rising interest rates are a positive sign for the economy.

Deposit interest rates have been on the rise since the end of the first quarter, and have been widespread in the second and early third quarters. Since the beginning of August, the market has seen dozens of commercial banks increase deposit interest rates, including: Agribank, Eximbank, HDBank, Sacombank, Saigonbank, TPBank, CB, VIB, Dong A Bank and most recently VPBank.

With banks with the largest deposits in the system such as Agribank, VPBank, Sacombank... all increasing their deposit interest rates, the deposit interest rate level is forecasted to continue to increase in the coming time.

MBS Securities' analysis report forecasts that input interest rates will continue to increase in the second half of 2024 as credit demand will continue to increase more strongly from mid-2024 when production and investment accelerate more strongly in the last months of the year. 12-month term deposit interest rates of major commercial banks may increase by 0.5 percentage points, returning to 5.2-5.5%/year by the end of 2024.

Commenting on the trend of increasing interest rates of banks, Dr. Le Xuan Nghia commented: “Interest rates are an extremely important indicator for the financial market, interest rates are on the rise, and we all hope that interest rates will decrease further to support businesses. Currently, there are no factors supporting the reduction of interest rates as we wish. However, this is not dangerous, and is also beneficial for the economy, increasing interest rates will help balance investment channels, and at the same time support the liquidity of the banking system”.

Dr. Le Xuan Nghia also said: “Interbank interest rates in the first quarter were only 0.3%, but in the second quarter they jumped to 4%. This shows that liquidity is becoming problematic. When growth is high and the economy recovers, interest rates are also higher due to increased capital demand. Therefore, I agree with the opinion that even if we try to control interest rates, they will gradually increase again.”

Interest rate increase may be due to increase in bad debt

Analyzing the reasons for the increase in interest rates, Dr. Nguyen Tri Hieu - an economic expert - commented that currently, the mobilization interest rate is gradually increasing due to two reasons. Firstly, in the second half of the year, banks may be more aggressive in lending, so they have to mobilize more capital, banks have to increase the mobilization interest rate to attract capital.

On the other hand, the expert said that the increase in deposit interest rates could also be due to an increase in bad debt. “Bad debt on the balance sheet at this time is about 4.5%, if we calculate bad debt off the balance sheet according to my estimate, it is about 6%. With high bad debt and high capital demand, deposit interest rates will have to increase, causing lending interest rates to increase as well.

When lending capital does not return to the system, banks must mobilize new capital to pay for old maturing deposits. Raising deposit interest rates to attract new cash flow may be a necessary measure to ensure liquidity, but it also pushes up borrowing costs because banks need to maintain a profit margin of 3-4%," the analyst said.

Dr. Nguyen Tri Hieu predicts that in the last months of the year, with production and business activities improving, banks will be more generous in lending.

"Increasing interest rates indicate stronger economic activity as individuals and businesses borrow more. In this scenario, banks will increase deposit interest rates to increase deposits and loans, which has already happened at this point. Increased deposit interest rates are likely to lead to lending interest rates. It is forecasted that lending interest rates will increase in the second half of 2024," said Dr. Nguyen Tri Hieu.