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Deposit interest rates to fall to 12%?   2008-11-07 - Viet Nam Net

State-owned banks have slashed their lending interest rates significantly, while they have kept deposit interest rates the same. Meanwhile, joint-stock banks have kept the lending interest rates as high as 18% per annum, but have slashed deposit interest rates significantly.


State-owned banks regain the deposit market share


State-owned banks have slashed their lending interest rates significantly, while they have kept deposit interest rates the same

The interest rates for 3-12 month deposits, offered by joint stock banks, have been lowered to 14-15% per annum. ACB’s 12-month term deposit is now at 12.9% per annum. Only joint-stock banks that have shifted from being rural banks to being urban banks are keeping high deposit interest rates of 17%. Meanwhile, state-owned BIDV has interest rates for 12-month term deposits at 16.5%, and for over-12-month term deposits at 17% per annum. Agribank’s rates are 15-15.7% per annum.


The lending interest rates currently offered by state-owned banks have been slashed to 15-16.5% per annum. Why are they still keeping the deposit interest rates high?


The director of a joint-stock bank, who asked to remain anonymous, said that state-owned banks have cheap capital sources, which allow them to make profit even with lending interest rates of 14-15% per annum. The state-owned banks still keep high deposit interest rates because they want to regain the clients they lost in the first nine months of the year when they mobilized capital at interest rates lower than those of the joint-stock banks.


Deposit interest rates to drop to 12%?


Within a short period of time, from October 21 to November 5, the State Bank of Vietnam has twice slashed the basic interest rate by 1%. These moves by the bank and the decisions to help banks improve their liquidity have paved the way for banks to slash deposit and lending interest rates


It is obvious that banks are considering cutting their interest rates. According to Vo Tri Thanh, Director of the International Integration Studies Department, under the Central Institute of Economic Management, when deciding interest rates, banks should consider the possible VND devaluation rate and the US$ interest rate as well (Thanh believes that the central bank will need to adjust the VND/US$ exchange rate and the VND will lose its value). Therefore, Thanh thinks that the 12-month term deposit interest rate would have to be no less than 13% per annum.


However, other experts believe that the 12-month term deposit interest rates may drop to 12% per annum by the end of the year if Vietnam can stabilize the exchange rate. The VND interest rate is forecasted to be at 10% per annum in the first quarter of the next year. With a deposit interest rate of 12% per annum, the lending rate may drop to 14.5-15% per annum.

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