As the gap between credit growth and deposit growth remains wide, there is little room left for further rate cuts, requiring monetary policy to strike a balance between supporting economic growth and safeguarding financial stability.
According to the National Statistics Office’s socio-economic report for the first six months of 2026, as of June 26, deposits at credit institutions had risen by 5.02% compared with the end of 2025, while credit growth reached 7.41%. The gap of more than 2.3 percentage points reflects the continuing trend of lending expanding faster than deposit mobilisation, increasing pressure on liquidity management across the banking system.
Mounting liquidity pressures
According to Pham Chi Quang, Director of the Monetary Policy Department at the State Bank of Viet Nam (SBV), deposit growth has consistently lagged behind credit growth over the past five years. On average, annual credit growth has exceeded deposit growth by around 3.8 percentage points. Notably, the system-wide loan-to-deposit ratio currently stands at approximately 111-112%.
This means that for every 100 VND mobilised in deposits, banks are lending around 112 VND, with the shortfall financed through other funding sources. Although the banking system continues to maintain adequate liquidity, mounting pressures are making it increasingly difficult to keep interest rates at low levels.
Deposit growth has consistently lagged behind credit growth over the past five years. On average, annual credit growth has exceeded deposit growth by around 3.8 percentage points. Notably, the system-wide loan-to-deposit ratio currently stands at approximately 111-112%.
Pham Chi Quang, Director of the Monetary Policy Department at the State Bank of Viet Nam
Moreover, the pressure stems not only from rapid credit expansion but also from the mismatch in funding maturities.
According to SBV Governor Pham Duc An, around 80% of the banking system’s funding comes from short-term deposits, while businesses’ demand for medium and long-term loans continues to grow. This maturity mismatch requires credit institutions to carefully balance the need to expand lending and support economic growth with the responsibility of maintaining liquidity and managing risks.
Developments in several localities also suggest that balancing deposits and lending is becoming an increasingly important issue.
In Vinh Long Province, as of the end of June, total deposits had reached 185.538 trillion VND, up 7.57% from the beginning of the year and sufficient to meet 97.72% of local credit demand. Meanwhile, outstanding loans exceeded 189.684 trillion VND, an increase of 4.31%.
Although deposit growth outpaced credit growth in the province, deposit mobilisation still fell short of fully meeting lending demand. This highlights that even in areas where credit growth remains moderate, maintaining a balance between funding sources and lending continues to be a key challenge for credit institutions.
Significant rate cuts unlikely
Against the backdrop of liquidity pressures and rising funding costs, analysts and economists generally believe that there is little prospect of a substantial decline in interest rates during the second half of the year.
Phan Quoc Buu, Director of the Research and Analysis Centre at BIDV Securities (BSC), said interest rates had likely approached their peak and would become more stable in the second half of 2026. The scope for significant rate cuts is now limited, while a scenario in which rates remain broadly unchanged or edge up slightly is considered more likely.
ACB Securities (ACBS) also forecasts that deposit rates could rise by 0.2 to 0.5 percentage points in the third quarter, as demand for production and business capital enters its peak season.
Meanwhile, VNDirect Securities believes lending rates are unlikely to fall soon because credit growth remains robust. In addition, the State Treasury’s planned issuance of a large volume of government bonds is expected to intensify competition for capital in the market.
Taking a more optimistic view, KB Securities Viet Nam (KBSV) expects deposit rates to remain elevated during the third quarter before easing slightly from the beginning of the fourth quarter, supported by factors such as lower global oil prices, a more stable exchange rate and greater room for the SBV to inject liquidity into the banking system.
The effectiveness of monetary policy measures is also expected to help ease funding pressures on commercial banks. In addition, faster disbursement of public investment and the implementation of growth-support measures could improve capital allocation across the economy. However, any reduction in lending rates is likely to occur with a lag, as banks need time to absorb the higher funding costs incurred earlier.
Should rates decline, the reductions are expected to be concentrated mainly in priority sectors such as manufacturing, exports, infrastructure and industries that drive economic growth.
According to BIDV Chief Economist Can Van Luc, interest rates are unlikely to rise further. If they do fall, the reductions will probably be modest and limited to priority sectors, key projects or high-quality borrowers. A return to the exceptionally low interest rates seen in previous years is highly unlikely.
Interest rates are unlikely to rise further. If they do fall, the reductions will probably be modest and limited to priority sectors, key projects or high-quality borrowers. A return to the exceptionally low interest rates seen in previous years is highly unlikely.
Can Van Luc, BIDV Chief Economist
Associate Professor Dr Nguyen Huu Huan, Vice Chairman of the Executive Board of the Viet Nam International Financial Centre in Ho Chi Minh City, also forecasts that lending rates will remain broadly stable in the second half of the year, with possible reductions of only 0.3-0.5 percentage points per annum for selected high-quality borrowers and priority sectors.
“There is little room left to reduce policy rates because they must be balanced against exchange rate pressures, international capital flows and the need to maintain the attractiveness of bank deposits. Rising non-performing loans are also forcing banks to increase provisions, limiting their ability to lower lending rates,” Associate Professor Dr Nguyen Huu Huan said.
According to the SBV’s report on lending rate developments at credit institutions in June 2026, the average short-term VND lending rate for priority sectors remained at around 3.9% per annum, below the regulatory ceiling of 4% per annum.
However, many banks have also announced average lending rates exceeding 10% per annum. For both new and existing VND-denominated loans with outstanding balances, the average lending rates at state-owned commercial banks and joint-stock commercial banks ranged from 8.1% to 10.5% per annum.
For USD-denominated loans, average lending rates for new and outstanding loans at the two banking groups ranged from 4.1% to 5.4% per annum.
Representatives of Bcons Investment Construction JSC and several garment manufacturers in Ho Chi Minh City said they were currently borrowing at rates between 10.4% and 15% per annum, levels that are placing significant strain on their operations.
These developments suggest that the key challenge for interest rate policy going forward is not simply how many more percentage points rates can be cut, but also the ability to balance funding sources, control input costs and strengthen the economy’s capacity to absorb capital.
As the scope for interest rate management continues to narrow, maintaining a stable interest rate environment while selectively reducing lending rates for priority sectors may prove a more appropriate approach than pursuing broad-based, substantial rate cuts.
