SBV urged to slash US dollar rates

The Viet Nam Association of Financial Investors has called for the central bank to slash the deposit interest rate on US dollars.

Nguyen Hoang Hai, general secretary of the association, said deposit interest rates on the US dollar for enterprises should be cut to zero from the current rate of 1 per cent while the rate of 3 per cent applied for citizens should be reduced to 1 per cent.

However, with a cap of 1 per cent for individuals, bank reserves should be increased to prevent banks raising their own rates to lure customers, he said.

“The State Bank of Viet Nam (SBV) should lower the rates as a premise for cutting the interest rates on dong, which are too high, while ensuring that it would not affect monetary policies,” Hai said.

He said the economy and enterprises would benefit more from the interest rate cut.

“If the method is successful, the central bank should continue to reduce the deposit interest rates for citizens to zero. Furthermore, an extra fee should be imposed for individuals’ savings in foreign currencies.”

According to the association, last month the SBV restrained US dollar deposit interest rates to 3 per cent and 1 per cent for individuals and corporations, respectively.

Along with an obligatory regulation of commercial banks to increase their current reserves by 2 per cent, the exchange rate between the dong and the US dollar declined by 5 per cent on the market while commercial banks’ US dollar supply was in surplus.

Also, citizens had a trend to sell their foreign currencies and deposit in the domestic currency.

Many argued that if the central bank lowered deposit interest rates, remittance might decline.

In response, the financial investors’ association said that a fee of 2 per cent was applied for money transfers from Viet Nam to another country and there were risks involved in the transfer process causing individuals to hesitate.

The association also added that now was the best time for the central bank to implement the method to remove dollarisation while aiming to halt bank deposit and lending activities in US dollar. — VNS

Tags: US dollar rates