Central bank to crack down on interest rate abuses

June 17, 2011 | 18:46

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The State Bank of Vietnam (SBV) has requested commercial banks to strictly conform to regulations on VND deposit interest rates.

The State Bank of Vietnam will crack down on interest rate abuses

Many commercial banks have raised interest rates on deposits to 18 per cent to 19.5 per cent per year, despite the ceiling of 14 per cent set by SBV in a circular issued in March this year.

Some banks have also been offering gifts or "bonuses" to attract deposits.

An employee of one commercial bank in Hanoi said that his bank offered an interest rates of 18 per cent for deposits over VND200 million ($9,708), and 19 per cent for deposits of VND1 billion ($48,543) or more.

SBV also ordered banks to apply reasonable lending interest rates to enterprises, particularly those operating in the areas of agriculture, rural development and exports. They must also give priority to small to medium-sized enterprises and their supporting industries.

With lending interest rates soaring as high as 22 per cent per year, many of companies have had to scale back their operations due to shortage of capital.

Le Viet Ha, chairman of Hanco Company, was cited by Vnexpress as saying that his company had to pay VND1 billion ($48,543) for a VND40 billion ($1.94 million) loan, at an annual interest rate of 22 per cent.

The State Bank of Vietnam plans to work with inspection agencies in order to tighten control over enforcement of interest rate regulations.

Banks which violate the rules can be fined, or even have their operations suspended.

These actions by the central bank are part of a broader monetary policy meant to stabalise the monetary market and curb inflation.

Dtinews

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