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Vietnam dong deposit interest rates cool down   2011-07-08 - VNE

The monetary market has cooled down when the deposit interest rates negotiated between banks and clients have decreased by 1-2 percent. Some banks now even quote the deposit interest rates lower than the ceiling level of 14 percent per annum.

An officer of a commercial bank on Hoang Quoc Viet Road in Hanoi, said on the morning of July 6, that the bank’s interest rates for 2-3 month term deposits have decreased by one percent to 17 percent per annum (the rate is only applied to the deposits worth 300 million dong and more). However, the officer said that the bank is still paying 18 percent per annum for one-month term deposit.

18 percent is also the deposit interest rate quoted by a commercial bank on Nguyen Luong Bang Street in Hanoi, a decrease of 0.5 percent from the previous level. An officer of the bank said that the highest interest rate applied by the bank still stays high at 18.5 percent per annum, but the rate is only applied to the big deposits worth of one billion dong or more.

The rate would be lower by 0.5 percent for the deposits worth from 500 million dong to less than one billion dong. If depositing less than 500 million dong, depositors would get 17.5 percent per annum.

Also according to the officer, other banks have also eased their interest rates. The rates could be as high as 20-21 percent or as low as 8 percent.

Interest rate decrease is also the growing tendency in HCM City. Director of a joint stock bank in district 10 said that previously, his bank offered the interest rates of up to 20 percent, while it has eased to 19 percent. Meanwhile, other banks in the city say they are now offering the interest rates of 16-17 percent only because their capital has become profuse.

Deputy General Director of Eximbank said that commercial banks are considering lowering the deposit interest rates after the interbank interest rates have dropped to 16 percent per annum. This means that banks would not get fat profits any more if they lend money on the interbank market.

The State Bank, when purchasing a big volume of dollars for foreign currency reserves, has put a big volume of dong into circulation. Meanwhile, commercial banks have mobilized a considerable volume of capital; therefore, they do not face liquidity problems any more.

“It is understandable why the interest rates are going down,” he said.

Meanwhile, another banker said that banks have to slash the deposit interest rates because they have no more room to expand credit (the State Bank has decided that the credit growth rate in 2011 must not be higher than 20 percent, while the credit to non-production sectors must be reduced to less than 22 percent). Meanwhile, the capital has become cheaper with the interest rates on the open market operation (OMO) having reduced to 14 percent from 15 percent.

However, the banker believes that the deposit interest rates will not decrease sharply, until the State Bank makes intervention, or a commercial bank comes forward and announces the sharp interest rate decreases.

The banker does not think that the interest rates will go down considerably also because of the current high inflation rate, saying that the interest rate decreases will be seen more clearly in the next year.

Le Duc Tho, Deputy General Director of Vietinbank, said that the interest rate decreases will in no way affect banks’ liquidity. “The liquidity problems will only occur when there is the imbalance between the input and output capital. Meanwhile, in this case, the 15-17 percent interest rates are really reasonable,” he said.

The lending interest rates have also begun decreasing. The above said bank on Nguyen Luong Bang Street in Hanoi has lowered the lending interest rates by 0.5-1 percent per annum to 22 percent.

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