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After the State Bank of Vietnam increased the basic interest rate to 8 percent, many commercial banks are now offering a new interest rate of 10-10.5 percent/year.
Sharp increase in interest rates
The commercial banks raised their interest rate by 0.5-1.5 percent over last month’s rate in order to attract more capital. Many customers are satisfied with the new interest rate and have started to deposit their money in the banks.
Pham Hoang Trang, a resident of Hang Dao Street in Hanoi, said that she bought gold at VND26.7 million/tael and then sold it at VND28.5 million/tael on Dec. 4. She put all the money in her bank. “The bank’s interest rate is more attractive now, even for short-terms of 1-3 months (about 10-10.2 percent). For the one-year term, customers can enjoy an interest rate of nearly 10.5 percent,” she added.
On Dec. 5 at the headquarters of the Bank for Foreign Trade of Vietnam, Nguyen Thu Ngan, a customer, said that she had decided to bank her money to get an interest rate of more than 10 percent. “This new rate is high enough to attract more customers,” she explained.
According to Ms Ngan, previously, the banks had failed to raise much capital because it provided a low interest rate, while the price of gold and foreign currencies increased rapidly. Many customers withdrew their money from the banks to buy gold and foreign currencies.
However, at present, the prices of gold and foreign currencies are soon likely to reach their highest point and the stock market is already experiencing fluctuations, so many customers are keen on depositing their money in the banks for safety reasons, she elaborated.
Currently, most commercial banks have increased their interest rate to over 10 percent/year, even for short-terms from 1 to 3 months. A number of banks, such as Vietinbank, Vietcombank, ABBank, Ease Asia Bank and SEABank are also offering an interest rate of 10.49 percent for a one-year term.
In addition, many banks have also launched promotions programmes so that customers have the chance to get a car, gold, life insurance or a healthcare check-up. In particular, Hanoi-based banks have been successfully in moblising more capital thanks to the newly-adjusted interest rate.
Focusing on risk management
According to senior baking officials, the banks which have increased their interest rate, do not have to arrange any medium-or-long term capital.
Nguyen Thanh Toai, Deputy General Director of the Asia Commercial Bank (ACB), said: “We have to increase the interest rate to ease the shortage of capital in order to ensure liquidity and attract more customers.” Banking chiefs have also agreed that the high interest rate does not mean that the banks are at risk as each bank has its own policy.
To limit an uncontrolled increase in bank interest rates, the State Bank of Vietnam (SBV) has stepped up the monitoring of the banks which raised their rates to above 10.5 percent/year. In fact, the banks had received permission from the SBV, the Vietnam Banks’ Association and the State-owned commercial banks after the SBV set a basic interest rate of 8 percent/year.
Regarding the increase in the interest rates of commercial banks, the SBV Governor Nguyen Van Giau said: ”It is good for the banks that can offer an interest rate of 10.5 percent/year. However, the SBV will intervene if any banks raise the rate to above 10.5 percent/year.”
However, there are rising concerns about the possible increase of credit in the whole system, which should have fallen by 30 percent following the target set at the beginning of the year. Last week, credit growth reached more than 36 percent.
Nevertheless, the SBV’s Governor said the increase in bank interest rates sill not have a strong impact on the growth of credit in the remaining months of this year. The monetary policy needs to be flexible, as in reality, there are many rapid changes happening, he noted.
