Mobilisation pressures weighing on lenders

Many local banks are starting to feel the pinch as they hunt for extra funds

Last week, interbank market lending rates continued to climb. Accordingly, overnight rates stood at 20-21 per cent, per year  while one-week rates stayed at 24 per cent, per year.

“Rising interbank market rates have signaled a shortage of funds within the system,” said a Bank for Foreign Trade of Vietnam executive.

Last week, some banks sharply lifted their non-term deposit interest rates. VietA Bank raised its non-term deposit rate to 8 per cent, per year while VP Bank lifted to 9 per cent, per year. Normally, non-term deposit interest rates linger 4-5 per cent, per year.

Nguyen Dai Lai, vice head of Credit Information Centre, said snatching for non-term deposits could be the cheapest way for banks to raise funds.

“Borrowing via the interbank market is becoming more and more expensive, while deposit interest rates are capped at 14 per cent, per year,” said Lai.

In early March, the State Bank hiked refinancing and discount rates to 12 per cent from 11 and 7 per cent respectively, to improve economic stability.

Earlier, on February 23, the State Bank also lifted seven-day lending rates to local banks via the open market operations (OMO) window from 11 to 12 per cent, per year.

OMO is a window where the State Bank extends short-term loans to local lenders with collateral being valuable papers such as government bonds.

It was the  fourth raise since November 2010 from the long-lasting 7 per cent, per year level to 12 per cent, per year.

Vo Thi Sanh, head of BIDV’s Asset-Liabilities Committee, said that hiking non-term interest rates also helped banks attract depositors withdrawing money prior the due date.

“It is like a response to the State Bank’s stricter rule released two weeks ago,” said Sanh.

On March 10, with Circular 04/2011/TT-NHNN, the State Bank requested local lenders apply the lowest non-term interest rate to depositors withdrawing money prior due dates.

In the past, local banks spoiled depositors by paying high rates to depositors withdrawing money prior to due dates. For instance, for a 12-month deposit, a customer can enjoy 14 per cent, per year interest returns after 12 months. But, if the customer withdraws money after six months, the applicable interest rate was six-month deposit rate at 12 per cent, per year for instance. From now, the applicable rate in such a case would be the non-term deposit rate.