Green lights are on, but banks go slow

Contrary to predictions, commercial banks are proving reluctant to raise deposit interest rates, despite the State Bank of Vietnam “green light” raising of basic interest rates to eight percent.

Deputy general director of Nam Viet Bank Nguyen Giang Nam said the highest interest rates to be offered by the bank will be 10.5 percent per annum which many banks have agreed to set as the maximum deposit interest rate. However, he himself still does not know to which kind of deposits the interest rate will be applied.

Meanwhile, Pham Duy Hung, general director of Viet A Bank said that though banks are thirsty for capital, they would incur heavy loss if they offer an interest rate of 10.5 percent for all kinds of deposits.

According to the State Bank of Vietnam, a number of commercial banks raised the deposit interest rates by 0.5-1.2 percent per annum on November 26. The highest interest rate, 10.5 percent per annum, is now offered by the banks for over 12 month term deposits.

The report by the central bank on the interest rate performance of the previous week (November 23-27) showed that the average deposit interest rate offered by credit institutions increased by 0.1-0.6 percent per annum over the previous week. State owned banks offered deposit interest rates of 9.3-10.5 percent per annum, while rates were 9.6-10 percent for joint stock banks

On December 1, the day when the new basic interest rate of eight percent became effective, banks raised VND deposit interest rates by 0.3-1.2 percent per annum compared to the end of November. They also raised the US$ interest rate by 0.2-0.5 percent per annum.

Meanwhile, the lending interest rate has been raised to nearly 12 percent per annum as the result of the higher cost for capital mobilization.

Economists believe that the move by the central bank to adjust the basic interest rate will support cash flow into banks. Making deposits will remain an attractive investment, because depositors will still be able to enjoy real positive interest, as the inflation rate is forecast to be below seven percent, while other investment channels prove to be risky.

Deputy general director of Maritime Bank Nguyen Dinh Tung does not think that the deposit interest rates will increase sharply, because banks fear that overly high deposit interest rates will mean no profit for banks.

Tung said that other investment channels have attracted big money from the public which means that there is no much money left for banks to attract.

Deputy general director of Dong A bank Nguyen Thi Ngoc Van said her bank is considering raising deposit interest rates in early December. “However, interest rates will not increase sharply from the current rate of 9.99 percent,” Van said.

Other bankers said raising deposit interest rates will not help banks lure more capital. Depositors will only make short term deposits, which allow them to withdraw money whenever they want to make deposits at other banks offering higher interest rates.

VietNamNet/VNE

Tags: Vietnam deposit interest rates, Vietnam finance news