VNBusinessNews.com – Depositors now do not have many options of interest rates when deposit interest rates of banks are the same with the highest rate of only 10.5 percent a year so State Bank of Vietnam regulated that the watchdog body would inspect entirely banks with deposit rates of more than 10.5 percent a year.
Because of being limited by the ceiling deposit interest rate, banks have to compete each other within a narrow gap, below 10.5 percent a year while the previous ceiling interest rate was 10 percent a year. Nam Viet Bank fixes its deposit interest rates at 10.49 percent a year for one to sixty-month terms. Similarly, Vietnam Export and Import Commercial Joint Stock Bank (Eximbank) applies the same interest rate of 10.08 percent a year for 10 different terms.
Unlike the previous time, interest rates of banks fail to follow such a principle that short-terms are entitled to high interest rates. Currently, many banks set high interest rates for short—term deposits in order to make use of all sources of capital, particularly less-than-three-month terms. At Saigon Thuong Tin Commercial Bank (Sacombank), Eastern Asia Bank (EAB), Viet A Bank and others, the interest rate for one-month terms is prevailingly 10.02-10.49 percent a year. At week-term deposits, EAB, HCM City Housing Bank put forward an interest rate of 10.02-10.32 percent a year.
Pham Duy Hung, general director of Viet A Bank, said that almost all depositors select short-terms of one to three months, or even week terms in order to flexibly redeposit their money when banks raise deposit interest rates. Thus, in order to attract capital, banks are now strongly increasing short-term deposit interest rates.
Because of the limitation of the ceiling interest rate, difference in interest rates among terms is also narrowed. At EAB, the gap of interest rates between one month and 36 month terms is only 0.07 percent a year. Some banks apply interest rates for short-term deposits higher than that for long-term deposits. The highest interest rate at Viet A Bank belongs to three-month terms, followed by 4-6 month terms. At Eximbank, deposits are entitled to an interest rate of 10.2 percent a year for three-month terms but only 9.6 percent a year for 36-month terms.
According to the central bank, one week after deposit interest rates increased, deposits of the whole banking system rose by 2 percent against the end of November, reaching 27 percent. Meanwhile, total outstanding loans reduced by nearly 1 percent to 36 percent. The central bank said that this was a positive sign for improvement of liquidity.
A vice general director of a joint stock bank said that some small-scaled banks are hunting for clients having huge deposits that are coming to due dates in a bid to offer high interest rates, which may exceed the ceiling rate of 10.5 percent a year.
Such high offer only happens in small joint stock banks, hence, capital from state-owned banks are flowing into small joint stock banks.
According to Le Xuan Nghia, vice chair of National Financial Supervising Committee, people who are holding foreign currency should make careful consideration. Those who want to hold US dollars will compare the forex rate between dong and US dollar. It is assumed that the US Federal Reserve at the start of 2010 would increase its key rate and the US dollar sharply increases, then the forex rate between dong and US dollar may change toward a trend that dong would weaken.
However, also from 2010, the government would stop subsidising interest rates for short-term loans then dong would be likely to appreciate. Furthermore, the forex rate and interest rate policies are both strongly intervened by the State Bank of Vietnam. Therefore, Nghia said that interest rates would see no big change at least until the end of the first quarter of 2010.
Although many experts forecast that inflation risks in the coming time would boost dong interest rates. However, Nghia cited the World Bank’s forecast that the world’s price in 2010 would increase by only 1.5 percent against 2009. The goods group that is predicted to increase a little bit is food. Regarding the two aspects, inflation caused by money supply or inflation caused by the world’s price is low. Thus, there would be less likelihood that interest rate would increase highly because of inflation.
Director of the central bank-HCM City arm Ho Huu Hanh said that deposit interest rates have changed since the basic interest rate increased to 8 percent a year. However, in the coming time, deposit interest rates would hardly change much because banks would have to consider and balance between input and output capital.
Dr Cao Sy Kiem, member of National Monetary-Financial Consultation Council, said that amidst the current time, with movements of the monetary market, it is the best to deposit dong into banks.