Great interest over interest decision

While smaller banks want to remove the ceiling mobilising rate to quench their thirst for capital, many industry players said the tool was still important to ensure stable market.

DongA Bank general director Tran Phuong Binh said killing ceiling deposit rates would break current stability in banks’ mobilising and banks would find it difficult to save input costs, paving the way for them to gradually relax lending rates.

The executive of a small Ho Chi Minh City bank assumed maintaining ceiling mobilising rate in current context would yield little effects. Hence, banks would not race to drive up rates to lure capital once the ceiling deposit rate was removed.

Orient Commercial Bank (OCB) chairman Trinh Van Tuan said the interest rate being fixed based on the capital supply and demand situation would be the best-case scenario.

Tuan said mobilising rates might be set higher after the ceiling deposit rate was abolished, but this could not last when banks saw so modest credit growth which is expected to hike merely 10 per cent in 2012.

National Financial and Monetary Policy Advisory Council member  Tran Du Lich supposed the ceiling mobilising rate was still important as once it was removed, small banks would continue their interest rate hike race.

“Some small banks have lifted up the mobilising rate for over a year deposits as allowed by the State Bank. Hence, abrogating ceiling mobilising rate would not be a smart option from now until the year’s end,” said Lich.

Ho Chi Minh City Economics University deputy rector Tran Hoang Ngan said the State Bank would put banks striving to raise deposits at high rates into a special control group after abolishing ceiling mobilising rate. Therefore, the interest rate could gradually slide, but fixing the right time for taking the move was of crucial importance.