Big interest in stabilising financial market

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Financial experts assume that current ceiling deposit rate of 14 per cent, per year is no longer appropriate. In reality, to lure in more deposits, banks have to lift the deposit rates to 18-19 per cent, per year.

Though the State Bank urged local banks to strictly abide by central bank regulations to cap the deposit rate at 14 per cent per year, in fact the deposit rate hike race still continues in the wake of spiraling inflation and the supply-demand situation in the market.

A deputy general director of a joint stock bank acknowledges new deposits from the community and economic organisations currently remain scarce. In fact, many customers take back money from one bank to deposit at other banks offering higher interest rates.

Deputy chairman of the National Financial Supervisory Commission Dr. Le Xuan Nghia said the ceiling 14 per cent deposit rate was low compared to expected inflation, so that for customers to enjoyed a positive interest rate banks have to lift their deposit rate to 17-18 per cent, per year to woo customers.

Besides, the State Bank recently lifted the open market operation (OMO) interest rate to 15 per cent per year, higher than current ceiling deposit rate of 14 per cent, per year.

Therefore, according to financial experts, the current ceiling deposit level needed to be revised to fit actual market conditions.

They also suggest imposing a ceiling rate on lending rates to stop banks from overcharging customers.

In this respect, head of Ho Chi Minh City University of Banking’s Business Management Faculty Dr. Le Tham Duong said putting a cap on lending rate was not a good option. He pointed out to 2008 case when the State Bank also put a cap on the lending rate and banks then created diverse kinds of fees to overcharge their customers.

Besides, setting a suitable ceiling lending rate was not simple in the present context of escalating inflation, according to Duong.

Supportive of the idea, Vietnam Bankers Association general secretary Dr. Duong Thu Huong said efforts must be centered on keeping outstanding loan growth of less than 20 per cent at banks as required by the central bank and taking suitable measures to bring down inflation.

“Once a ceiling lending rate was introduced, no one could say for sure the negative practices as in 2008 will not occur,” Huong said.

A member of the National Financial Monetary Advisory Council Dr. Tran Hoang Ngan also suggested to soon remove current ceiling 14 per cent per year deposit rate and not applying a ceiling lending rate scheme due to its unfeasibility.