VietNamNet Bridge – The dong deposit interest rates applied by some commercial banks unexpectedly jumped to 17-18.5 percent per annum a few days ago. However, despite the high interest rates, the deposited volume is still decreasing.

According to Saigon Tiep Thi, on March 1 morning, on the interbank market, commercial banks offer sky high interest rates of 19.5 percent for three month loans, an increase of three percent from three weeks ago.. Some banks have reportedly stopped disbursement.

Personal Banking Deputy Director of a joint stock bank said that big banks offer the interest rates of 16 percent per annum, while smaller banks like his offer rates of 17-18 percent per annum. As the deposit interest rates are high, the lending interest rates are also sky high at 21-23 percent per annum.

The deputy director said that he feels stressed because of the heavy responsibility and he is not really confident these days when approving loans. He said that the higher the lending interest rates,then the bigger the risks of the loans and the more responsibility he has to take.

Banks have stopped lending

Head of the credit division of the Tan Binh district’s branch of a joint stock bank said that the deposit interest rates applied by his branch has jumped to 18.5 percent per annum. In the morning of March 1, in the interbank market, other banks offered to lend at 19.5 percent for three month loans. Meanwhile, the interest rates were 16.5 percent only two weeks ago. The managers of his banks ordered to stop disbursement starting on February 28.

“The situation has become as taut as a violin string. I have been sitting idle since yesterday, because lending has halted,” he said.

Last week, after a long pause some commercial banks resumed promotion programs to attract more dong depositors, thus making the actual interest rates higher. By doing this, commercial banks have “dodged the laws” to raise interest rates, when the State Bank of Vietnam has decided that the deposit interest rate must not be higher than 14 percent per annum.

Meanwhile, the dollar deposit interest rates remain very high at 5-6 percent per annum. Vietcombank last week raised the dollar deposit interest rate by 0.5 percent on average, now offering 5.5 percent per annum as the highest interest rate. Meanwhile, Vietnam Tin Nghia Bank has become the bank that offers the highest interest rate of 6.17 percent per annum, applied to three month term deposits.

The above said head of the credit division said that banks have to raise interest rates because the inflation rate is high. If banks do not offer high interest rates which are higher than the inflation rate, they will not be able to attract capital into banks. Some analysts have said that those people, who have idle capital now, do not want to deposit at banks, but they would rather inject money in real estate. Therefore, they believe the real estate prices will keep rising in the time to come.

Deposits in dong down, in dollars up

Deputy Governor of the State Bank of Vietnam Tran Minh Tuan, in the meeting with commercial banks in HCM City on February 28, 2011, informed that the deposit balance in January dropped by three percent. The dong deposit balance dropped by 4.12 percent, while the dollar deposit balance increased by 4.43 percent, which shows that people now tend to sell dong to keep dollars for the fear of high inflation rates and the dong depreciation. Meanwhile, the value outstanding loans increased by 1.17 percent.

A lot of banks complained that they have to move heaven and earth to mobilize capital and increase liquidity.

The lending interest rate, according to Tuan, has soared to 24 percent per annum. Tuan described the interest rate as “abnormal”. “No enterprise will be able to make such a high profit to cover such high interest rates,” Tuan said.

At the meeting, representatives from Agribank in HCM City complained that it is very difficult to curb the deposit interest rate at 14 percent per annum, since the inflation rate is too high.

In the latest news, the State Bank of Vietnam on March 3 released a decision, legalizing the ceiling interest rate of 14 percent. The central bank has threatened to punish those banks which deliberately set deposit interest rates higher than the maximum level.

Source: SGTT