Banks pushed into a corner to toe the line

The shortest term available on the market is from one to six days applied by VietABank, ABBank, Nam A Bank and Navibank. With a nominal rate of 14 per cent compounded daily, after 365 days, the effective annual rate would be 15.024 per cent.

However, since the beginning of October, demand deposits and term deposits of less than one month for individuals and corporates will receive a 6 per cent per year rate, as stipulated in Circular 30/2011/TT-NHNN issued on September 28.

This circular will replace Circular 02/2011/TT-NHNN issued on March 3, 2011. Customers with deposits of more than one month will still receive the maximum rate of 14 per cent and customers of the People’s Credit Fund can enjoy a 14.5 per cent rate.

That means all banks’ programmes offering a daily rate at 14 per cent must be cancelled by this week.
The State Bank is also banning credit institutions offering promotion activities such as directly paying by cash or offering higher rates than regulated.

In addition, according to OCB general director Trinh Van Tuan, using the 14 per cent interest rate cap for deposits with unlimited terms may not prevent customers from withdrawing deposits. “Even long-term depositors can withdraw at anytime to invest in other channels and take the fine on the chin,” said Tuan

Deputy general director of Maritime Bank, Phung Huy Khuong said credit institutions would be forced to play with a straight bat. “It is the right time for commercial banks to enhance banking service quality to  attract customers,” said Khuong

Techcombank personal financial services head Dang Tuyet Dung agreed that service quality was key.
“It is possible for customers to withdraw cash to invest in other channels such as gold, real estate and foreign currency. Thus, banks can create conditions for customers to better access banking services,” said Dung.