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Banks dangle higher deposit interest rates, but at a cost   2008-02-21 - VNS

The deposit interest war among commercial banks continues to heat up, with banks now offering annual interest rates on dong deposits of up to 10.8 per cent and no end in sight.

Customers make a deposit at Vietcombank headquarters in Ha Noi. — VNS Photo Truong Vi

HA NOI — The deposit interest war among commercial banks continues to heat up, with banks now offering annual interest rates on dong deposits of up to 10.8 per cent and no end in sight.

Yesterday, Saigon joint stock commercial Bank raised annual interest rates to 10.56 per cent on a 12-month term deposit in dong, the bank’s fourth increase in the past 20 days. VP Bank continues to offer the 10.5 per cent rate it instituted on Monday. On Tuesday, SeABank responded to the VP Bank move by offering 10.68 per cent on 12-month term deposits and 10.8 per cent on 13-month term deposits.

Nam A Bank, Techcombank, and Habubank are all offering rates in excess of 10 per cent, and are offering other incentives to attract shorter term deposits.

Dr Vo Tri Thanh, senior economist with the Central Institute for Economic Management, has dismissed concerns over the interest war.

"Current rates are normal," Thanh told Viet Nam News in a phone interview yesterday. "Consumers would not save their money in banks if rates are lower than inflation."

"Banks complain that the interest rate war will affect their profitability," said Asia Commercial Bank deputy director Nguyen Thanh Toai. "But I approve of the various moves by the central bank to tighten the money supply for the long-term sake of the system."

These moves have included imposing higher compulsory reserves on commercial banks to get them to soak up excess liquidity, and tightening lending rules on loans against securities and real estate, as well as raising key interest rates to tighten credit generally.

Toai confirmed that high inflation was a major challenge to the State Bank. This year, the central bank was determined to use every measure to tackle inflation and ensure stable economic development.

The decision to increase compulsory reserves has channeled trillions of dong from commercial banks into stocks. Commercial banks must also buy VND20.3 trillion (US$1.27 billion) in treasury bills, tying up available capital and leaving them hungry for deposits.

ACB and VIB Bank reported they would raise interest rates further. An executive of a Ha Noi-based commercial bank yesterday refused an interview with Viet Nam News, saying the bank was meeting to discuss plans to increase interest rates.

But higher deposit interest rates would come with a cost, warned Toai.

"Higher deposit interest rates lead to higher lending interest rates," Toai said.

As an indication of things to come, interbank rates charged on overnight loans have already spiked, said a representative of Ocean Bank who asked not to be named. Some small banks still have accepted the high rates, because they lack ready funds to cover payments.

"Banks which accept such overnight loans must face serious payment problems," said Toai. — VNS

Battle of the deposit interest rates


13 month term



12 month term




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12 month term


VP Bank

12 month term




12 month term



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12 month term



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12 month term




12 month term



Southern Bank

13 month term


VIB Bank

12 month term



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12 month term


Interest rate in per cent per annum offered as of February 20

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