Vietnam Bank News

Deposit interest rates rising again   2009-07-30 - VietNamNet/DTCK

After a short interruption of three weeks, deposit interest rates are now increasing again. Nearly ten banks have pushed interest rates up to levels higher than in early July and launched attractive promotion campaigns to attract more deposits.

In the interbank market, the average VND interest rates in transactions have tended to increase over the last week. The interest rate of six-month term loans sees the biggest interest rate of 1.65 percent per annum.

However, the average interest rate of 12-month term loan is decreasing. The overnight interest rate is now 5.95 percent on average, up by 0.3 percent, while the rates of other terms are between 6.7 and 8.65 percent per annum. As for US$ loans, increases have been seen on one-week, two-week and six-month loans.

Bankers said that they have raised deposit interest rates simply because they aim to have more capital to satisfy the demand which is expected to increase, denying the fact that they are raising interest rates to compete with each other to expand their deposit market share.

Several days ago, there was a rumour that the State Bank of Vietnam planned to issue compulsory bonds to withdraw money from circulation to prevent inflation. Therefore, people thought that banks raised interest rates because they anticipated the central bank’s move.

However, the central bank has denied this, saying that the current situation is quite different from last year’s.

Bankers also believe that the central bank will not use the same measure it applied last year. Nguyen Dinh Tung, Deputy Director of Maritime Bank, said that unlike in 2008, banks’ operations have become more stable, while the basic interest rate is not high. Therefore, even if the central bank issued compulsory bonds, banks would not face difficulties because they have good liquidity.

Director of a HCM City Branch of a Hanoi-based bank said that a lot of deposits, which enjoy the high interest rate of 17-18 percent, will become mature at the end of July. However, the interest rate has dropped by 2/3, while there are many attractive investment channels. Therefore, he said, banks, afraid that depositors will not keep depositing at banks, have to raise deposit interest rates to retain depositors.

Tung believes that the deposit interest rates will continue increasing slightly towards the year’s end, even though the basic interest rate will remain unchanged. Banks will change interest rates for long-term deposits instead of short-term deposits as they did previously.

Meanwhile, Cao Van Duc, General Director of VietBank, said that the deposit interest rate is not likely to increase sharply as the lending interest rate is capped at 10.5 percent.

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