Banks see liquidity rise despite Tet cash demand

A surge in deposits during the last few months has helped banks ramp up their liquidity, despite growing demand for Lunar New Year (Tet) cash.

Previously, both individuals and firms often experienced high cash demand during the months leading up to Tet, due to which banks' deposits often fell.

Truong Dinh Long, Deputy General Director of the Orient Commercial Bank, told the Dau tu (Investment) newspaper that even though Tet is approaching, his bank's deposits in January rose by more than 6 percent from the month before.

He added that idle money deposited at his bank had also increased during the past few months through a reduction in deposit interest rates.

Photo for illustration. Photo: thoibaokinhdoanh.vn

Savings in banks, with an annual interest rate of 6 to 6.5 percent, are still considered more attractive than other investment channels, he pointed out.

Tran Ngoc Tam, Deputy General Director of Nam A Bank also said deposits at his bank had remained healthy during the last months of the lunar year, when both individuals and enterprises often reported high demand for Tet cash. Owing to this, his bank's liquidity has remained robust.
Another reason for this is that banks have also launched more promotional schemes to lure depositors.

Le Tham Duong, the head of the Business Administration Faculty under the HCM City Banking University, said the deposit interest rate is still positive, compared with inflation, so people still prefer to deposit their spare cash in banks.

This year savings will remain intact in banks as annual deposit interest rates are still pegged at 5 to 6 percent, which is higher than inflation. According to ANZ bank, inflation this year is anticipated to hover around 3 percent.

Experts also pointed out that deposits and savings are still seen as safe investments, as the central bank's monetary policy appears to be more supportive of the Vietnamese dong.

According to the latest survey on business trends at credit institutions and foreign banks' branches during the first quarter of this year, liquidity in the banking system has continuously improved.

Roughly 89 percent of surveyed credit institutions said their liquidity had improved from last year and is currently in a good condition. Strong liquidity will continue to be maintained this year as well, the State Bank of Vietnam forecasted.

Under the survey, the institutions also anticipate that their deposits will rise by 4.5 percent on average during the first quarter this year and surge by 14.35 percent for the entire year.