Banks and depositors haggle over deposit interest rates, again

While the government and the State Bank of Vietnam state that it is now the right time to ease the interest rates, commercial banks still mobilize capital and lend at high interest rates. While the State Bank affirms that commercial banks now dare not pay more than 14 percent per annum for deposits, the actual interest rates are 17-20 percent.

Break the laws, or die

A report released at the conference discussing the implementation of the tasks of the banking system in Hanoi held several days ago said that since the Governor of the State Bank released the Instruction No 02 on September 7, 2011, banks dare not offer overly high interest rates, while the haggling over interest rates has stopped.

However, bankers argued that in fact, banks and deposits have still been negotiating about the interest rates. Ngo Van Dung, Director of BIDV Hanoi Branch said that in fact, commercial banks only strictly followed the instruction No 02 for a short time, from September 7 to the end of September. Meanwhile, since October 2011, the interest rate haggling has returned, though it is not easy to discover the frauds and denounce them.

Nguyen Thi Nga, Chair of SeABank, has affirmed that the actual interest rates are much higher than the ceiling interest rate of 14 percent stipulated by the State Bank, at 17-20 percent.

She went on to say that since 1993, she has never seen banks falling into such big difficulties. Bankers now have to tell lie to the State Bank, and they have to break the laws by offering high interest rates, or they will not be able to mobilize capital.

Nga said that she knows many banks, who send staffs to depositors’ homes to negotiate about the interest rates and give money – the things they cannot do at the banks’ offices.

However, when asked which banks did this, Nga said that it was not her behavior to denounce other banks to the State Bank.

“SeABank has vowed not to break the ceiling interest rate, not because we have abundant capital. Before the “tsunami” occurred, we were wise enough to buy 12,500 billion dong worth of government bonds,” Nga said.

“If depositors withdraw money from our bank to deposit at other banks which pay higher interest rates, we would use the interests from the government bonds, or sell the bonds at a loss of 2-3 percent,” she explained.

Other bankers have also said that if the State Bank does not take actions, the haggling about interest rates would continue in 2012. Nguyen Thi Anh Binh, Deputy General Director of the Military Bank, said that she sometimes saw the deposits withdrawn by depositors increasing to trillions of dong within a month.

Le Xuan Nghia, Deputy Chair of the National Finance Supervision Council, said that he knows a bank mobilizing capital at the interest rate of 21 percent.

Meanwhile, Pham Thi Hang, Director of Agribank Hanoi branch, said that the current tense on the market is “abnormal thing”. Agribank, though having applied a lot of measures, still cannot see the mobilized capital increasing considerably in comparison with the same period of the last year.

Mobilizing 2-month capital to lend for one year

Banks have also expressed their worries about the capital structure. Hang said that the bank branch can mobilize three-month deposits, but it still has to provide medium and long term loans.

Sharing the same worry, Pham Xuan Hoe, Director of Nam Thang Long branch of VietinBank said that this is the same problem occurring with his bank. “This leads to the high risks in the liquidity, and I think that we will still have to face the risks in 10 more years,” Hoe said.

Tags: Vietnam banking industry, Vietnam finance, Vietnam financial