Banks enter rates race

Under a recent move by the State Bank (SBV), from December 24, 2012 maximum interest rates of short-term deposits in Vietnam dong shall be at most 8 per cent per year, down 1 per cent from previous level.

Small banks could hardly compete with bigger ones to lure depositors when the 8 per cent per year deposit cap was equally applied by banks, according to a commercial joint stock bank executive.

Nguyen Hoang Minh, deputy director of State Bank Ho Chi Minh City branch office, said possessing ample capital sources was vital to banks. Competition in this field is often tough, especially during period close to the Lunar New Year when customer demands for capital often spike.

Ms. Tung, a Ho Chi Minh City depositor, revealed she had VND2 billion ($95,000) idle capital and put it at a bank. One bank staff offered her to register for three-month term to enjoy 12.5 per cent, per year interest rate
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In fact, several banks have to offer more than 10 per cent per year interest rates to one to three-month deposits to keep stable their capital sources. This extra pay is often paid by banks to depositors when saving books come due.

SBV former chief Le Duc Thuy assumed central bank’s recent deposit cap was rational after 2012 inflation pace was kept at merely 6.81 per cent.

Thuy, however, acknowledged that banks luring depositors with higher-than-regulated interest rates were still commonplace.  

Eximbank general director Truong Van Phuoc suggested abolishing mobilising cap, paving the way to gradually pull down lending rates.

“Small banks would fuel rate hike race to attract customers in the initial period after mobilising cap was removed. However, with suitable regulating lending rates banks will have to moderate input costs,” said Phuoc. Doing so, he added, would help avert banks from impinging on mobilising cap while gradually smoothing lending rates.

SBV Ho Chi Minh City branch office statistics show that total deposit amounts at city-based banks was an estimated VND974 trillion ($46.3 billion) in 2012, surging 9 per cent against end of 2011. Of which, dong deposits hiked 13.9 per cent while foreign currencies’ deposits slid 6.7 per cent.