SBV sticks to 14% deposit interest rate cap

The State Bank of Vietnam (SBV) holds a consistent policy on keeping dong deposit interest rate cap at 14% p.a. although local lenders complain about their struggle in attracting funds, the central bank’s Governor Nguyen Van Giau told Vnexpress.

The State Bank of Vietnam (SBV) holds a consistent policy on keeping dong deposit interest rate cap at 14% p.a. although local lenders complain about their struggle in attracting funds, the central bank’s Governor Nguyen Van Giau told the local newswire VnExpress.

Any violations of the rate cap will be strictly penalized, the Governor affirmed.

“Consumer Price Index (CPI) in March grew 13.39% on year, which’s still lower than dong deposit interest rates. Staples of rising prices were seen and are getting more stable. Local lenders need to share responsibilities to stabilize macroeconomics”, Giau said.

“Amid economic turbulences, it’s impractical to require positive real interest rates (deposit interest rates are higher than inflation) but to get close to positive rates.

Experts are positive that Vietnam inflation will be able to stable and slow down in H2/2011. World Bank forecasted that CPI this year may rise by 9.5%, while International Monetary Fund (IMF) and Asian Development Bank gave more cautious figures of 13.5% and 13.3%, respectively.

In early April, some banks including big ones have boosted actual deposit interest rates to up to 17% p.a. and offered promotion added.

Cao Sy Kiem, the central bank’s Former Governor suggested the Government to allow local lenders to raise capital flexibly rather than cap dong deposit interest rates at 14% p.a.

“It’s better to rein in credits and restrict lending interest rates, allow local lenders flexibility to raise capital based on their demand and capacity instead of limiting deposit rates”, Kiem suggested, arguing that they will helping to moderate two goals: fight inflation and avoid rising borrowing costs for enterprises.

Currently, the SBV capped deposit interest rates at 14%, promotion included. – Stoxplus.com

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