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Banks raising long-term US$ deposit interest rates   2009-08-17 - VietNamNet/TT

Some joint-stock banks have raised US$ deposit interest rates again since the beginning of August 2009, especially on long-term deposits, in order to mobilise more capital to meet the increasingly high demand for US$ loans.


The highest US$ deposit interest rate now available is offered by Saigon Bank, at 3.3 percent per annum for 60-month term deposits.


The rates offered by the bank for 6- , 9-, 12-month term deposits are 2.3, 2.5 and 2.75 percent, respectively.


The highest US$ deposit interest rate offered by SeaBank is 3.1 percent per annum, applied to both 18- and 24-month term deposits, while the rate is 2.95 percent for 12- and 13-month term deposits.


At Vietcombank HCM City, the rate is 2 percent for 24-36-month term deposits, while at ACB and Eximbank the rate is 2.9 percent for 36-month term deposits.


When asked why banks have raised deposit interest rates, while they rushed to slash interest rates before because of the low demand for US$ loans, they said that the demand for US$ loans is increasing again.


Previously, businesses were reluctant to borrow money in US$ as they feared the dollar price would increase, thus putting a heavy financial burden on them. However, the demand for US$ loans has recovered since the State Bank of Vietnam applied a series of drastic measures to stabillise the foreign currency market and affirmed that it will following a stable foreign currency management policy, and does not plan to devaluate the local currency.


Nevertheless, experts believe that commercial banks have been pushing up mobilising long-term capital in foreign currencies primarily to take full advantage of the low-cost capital at this moment.


Currently, short-term US$ deposit interest rates are just hovering around 1.5 percent per annum. Previously, most banks tried to force deposit interest rates down in order to be able to slash the lending interest rate to 3 percent to encourage businesses to borrow in foreign currencies.


Currently, the US$ interest rate is now at a low level as the US Federal Reserve is keeping the prime interest rate at 0.25 percent. However, if the US economy recovers in the time to come and the high inflation threatens to return, it is highly possible that FED will raise the US$ interest rate.


Prior to that, in order to help the economy recover, FED continuously slashed the US$ interest rate from above 5 percent to 0-0.25 percent.


Though banks have been trying to lure more long-term deposits by offering high interest rates, experts do not think that long-term US$ deposits will increase sharply. Depositors have anticipated that US$ deposit interest rates will rise again; therefore, they are only making short-term deposits at this moment.


According to the HCM City Branch of the State Bank of Vietnam, the mobilised capital in foreign currencies by the end of July 2009 had increased by 8.3 percent over the beginning of the year, while 40 percent of the capital came from economic institutions.


Average deposit interest rates (% per annum)


Demand deposit

3 month term deposit

6 month term deposit

12 month term deposit

State owned banks











Joint stock banks
























Meanwhile, the State Bank of Vietnam has reported that by the end of July, the outstanding loans in foreign currencies had increased by 1.2 percent after two consecutive quarters of sliding.


After a period of trying to keep dollars and refusing to sell them to banks, many businesses have begun selling dollars. General Director of Vietcombank Nguyen Phuoc Thanh has confirmed that it has recently purchased more dollars from businesses. However, Thanh said that the volumes of dollars the bank can purchase are still not big enough to meet the demands of other businesses.


Thanh has confirmed that banks have been able to purchase dollars from the State Bank of Vietnam. Besides the businesses which need dollars to import essential goods like petrol importers, scrap steel importers have also been sold dollars to import materials for domestic production.

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