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Banks hike gold rates to lure deposits   2009-05-11 - Nguoi Lao Dong

Clerks at a gold store await customers in Hanoi. Banks are trying to mobilize gold deposits as they now lack the bullion for lending to gold stores, analysts say.  
Commercial banks are trying to attract gold deposits by raising interest rates, offering cash bonuses, and launching other promotion programs as recent gold price hikes prompt depositors to withdraw and sell their gold.


Analysts said banks need to raise gold deposits as they now lack the bullion needed for lending. Gold shops are the main borrowers of bullion, while most depositors are residents or speculators, bankers say.

VietA Bank increased its yearly interest rates by 0.4 percent to 0.7 percent for gold deposits last month. The Ho Chi Minh City-based lender now pays 2.5 percent per year for one-month deposits, 3.4 percent for three-month deposits and 3.6 percent for six-month deposits.

HCMC-based Eximbank is paying cash bonuses of VND25,000 per tael (one tael is equal to 1.2 ounces) for six-month deposits.

The Southern Bank, also based in HCMC, launched a three-month promotion program called “Deposit gold, win gold” early last month through a lottery scheme. The program also offers an interest rate bonus of 0.1 percent per year for deposits of between 10 taels and 50 taels, and 0.2 percent for deposits of 50 taels or more.

Nguyen Ngoc Que Chi, director of Sacombank Jewelry, said speculators prefer short-term deposits so that they can easily withdraw the precious metal for selling when the prices increase.

Saigon Jewelry Holding Company (SJC)’s gold prices closed last week at VND19.94 million (US$1,129) a tael in Ho Chi Minh City and VND19.96 million in Hanoi. The bullion has risen 12 percent so far this year.

An official from HD Bank, who wished not to be named, said many gold shops borrow the bullion for trading but pay it back before the maturity date if gold prices fall.

Bui Hong Tam, director of the Vietnam Jewelry Corporation, said as gold imports are now banned, banks lack the precious metal and are mobilizing deposits to meet gold traders’ demand.

The central bank had banned gold imports last May to restrict exports, but later let select banks export it in February and March.

Gold shops, especially those lacking financial strength to buy large quantities of the precious metal, not only borrow the bullion from banks at fixed interest rates but also from residents at negotiated rates.

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