Dong saving interest rates may not be eased soon: experts

With the consumer price index (CPI) increasing nearly 10 percent in the first four months this year, interest rates will be unlikely to be eased, according to financial experts.

A financial expert said that with solutions to stabilise the foreign exchange market, the VND/USD exchange rate will stabilise in the coming months, but interest rates may take more time to decrease.

In recent weeks, the market has seen some positive changes in interest rates as the State Bank of Vietnam (SBV) directed its local branches to continue to review and inspect banks that showed signs of breaking the prescribed ceiling rates of 14 percent per year.

But actually, the “underground” agreements on deposit interest rates in VND still exist on the market. On the other hand, to retain old customers and attract new sources of savings, in April, many banks including large joint stock banks launched promotions.

Under a ceiling interest rate of 3 percent per annum for US dollar deposits, banks will soon expect a positive impact on liquidity and interest rates of dong.

In fact, after more than two weeks, SBV capped the US dollar deposit interest rate of 3 percent per year and increased the reserve requirement ratio by 2 percent for foreign currency deposits, the market witnessed shifts from dollars to deposit savings in dong to banks.

But according to Bui Tan Tai, deputy director of ACB, this phenomenon is not evident and people must wait more time to see this trend.

Meanwhile, Tai said: “Because there is no sign of improvement in raising capital compared to previous months, it has been difficult to attract idle capital”.

Speaking at the annual general meeting of HDBank, To Lam Huy, deputy director of the SBV HCM City branch, said in the first 3 months of this year, capital mobilised by banks in HCM City fell 2.6 percent from early this year, while outstanding credit rose 3.4 percent.

“In the current context of the market, banks are facing certain difficulties in raising capital, especially when the inflationary pressures have not yet been controlled as expected,” Lam said.

Dr Tran Du Lich, member of national financial – monetary policy advisory council also remarked, facing the current inflationary pressures, the expectations of consumers’ interest rates are still higher than the ceiling of 14 percent per annum. So, businesses also need to rethink about their production and business plan this year as the negotiated interest rate platform may not be reduced earlier as expected. – Dautu

Tags: Vietnam banking industry, vietnam dong, Vietnam finance, Vietnam financial