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Wednesday, July 24, 2024

Dealing with idle cash

By Thuy Le

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In stark contrast with the liquidity crunch in late 2022 and early 2023 that forced banks to compete for funds by hiking interest rates, the banking system is now sitting on mountains of cash as the economy has little appetite for loans while deposits are steadily increasing. Cash paradox The rising amount of idle cash in the banking system can be seen through back-to-back interest rate cuts across all market segments. Since the beginning of the second quarter this year, interest rates have been falling steadily. In August and early September, banks further cut their borrowing rates, with some banks trimming deposit rates by up to one percentage point against that in July. Only six out of 35 banks in the country are keeping the interest rate for one-month savings at the ceiling of 4.75% a year. Medium-term deposits of six to 11 months now carry an annual interest rate of 5.5-6.0%, or even lower at only 4.7% at the Big Four banks, while long-term deposits of 12 months and beyond have an annual rate of less than 7%. Bao Viet Securities Company in a report said the current deposit rates have plunged to the levels seen during the peak […]
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