Savings in dong becoming more attractive

More than half of a month after the US dollar deposit rate has been adjusted down to 3 percent per year while the dong deposit rate is still standing at 14 percent a year, people in HCM City are wondering whether they should make deposit in dong instead of US dollars.

After the State Bank of Vietnam issued a Circular No 09/2011 regulating the ceiling dollar saving rate in US dollar at 3 percent per annum for individuals at credit institutions, most commercial banks has applied this rate to all terms (except for overnight and week terms).

At Vietcombank, its dollar deposit rate of 3 percent per annum is applied for the period from 1 to 60 months, along with the demand deposit rate of 0.1 percent per year.

In Eximbank, its US dollar interest rate structure is commonly 2.9 percent per year, while the yearly saving rate of 3 percent is only applied to its promotional saving product so-called “savings with selected terms for interest payment.”

Meanwhile, in VietABank, the dollar demand rate is 1 percent per year, and with the terms of from 1 – 12 months, depositors are entitled to 3 percent per year, from 15 months – 36 months with the rate of 2.5 percent per year.

Under this provision, the difference between the saving interest rates in dong and U S dollar has been up to 11 percent. Thus, with the current interest rates, sending 100 million to a bank with a term of three months, depositors will be in the hands of about 3.5 million dong interests. If sending $5,000 (equivalent to 100 million dong), after 3 months, depositors will receive only $37.5 (about 785,000 dong). Even when interest rates are adjusted, it is clear that this time, savings deposits in dong will be more beneficial than US dollars.

In Vietnam, according to a survey of To Quoc newspaper, due to the difference in interest rates, many individual clients have chosen dong instead of dollars as before.

A director of a joint-stock bank in Vietnam said that part of depositors of US dollars at this bank have switched to dong. The amount of dong deposits has increased slightly compared with before the promulgation of Circular 09.

According to this banker, customers who opened new savings accounts mostly selected dong instead of US dollars.

When the newspaper made interviews with some companies, most of them said: “If companies hold the foreign currency, they will suffer losses due to too low dollar deposit rates, while the exchange rate has stabilised. So many businesses have considered selling foreign currencies to the banks. ”

According to many experts, with US dollar and dong interest rate differential, combined with the exchange rates being held steady, the dong savings will be more beneficial. However, dollar interest rates have just reduced for a very while, so experts said they could give any specific forecast. Whether dong can defeat dollars or not, restore the confidence from people or not, it will take more time to see.

Tags: Vietnam banking industry, Vietnam finance, Vietnam financial, Vietnam interest rates