Scratching of heads at rate question

“The bank mobilising rate will slide to 8 per cent per year by the year’s end if we succeeded in keeping inflation at less than 7 per cent per year. However, in current context it is impossible to strongly reduce the rate since depositors would turn their back on banks and put their money into other more profitable channels,” said State Bank governor Nguyen Van Binh.

A National Financial and Monetary Policy Advisory Council member assumed the interest rate might be pulled down to below 10 per cent per year, at least from next year, if the macro-economy was put on an even keel with bridled inflation pace

That is because other investment channels like the realty and gold markets might be more appealing to depositors when the bank rate took a plunge.

That was also why senior economist Dr. Tran Du Lich suggested maintaining current 9 per cent, per year ceiling mobilising rate albeit inflation might drop to below 8 per cent per year by the year’s end.

In fact, a number of banks had reportedly neglected central bank’s regulated ceiling mobilising rate requirements to hike their liquidity.

Small players admitted when ceiling 9 per cent mobilising rate was equally applied by banks of all sorts and advantages always belong to big players with established reputation and healthy finance it would be hard to stop weaker banks from offering higher than regulated rates to lure in depositors.

In respect to banking operations, a newly released Standard Chartered report on Vietnam’s macroeconomic perspective assumed it would be likely for bank rates to further abate.

“We now forecast that GDP will grow 5 per cent in 2012, down from our previous forecast of 5.8 per cent. In line with the pattern in past years, we expect growth to pick up as the year progresses. Inflation has eased faster than initially expected, and we expect it to slow to a monthly average of 8.8 per cent in 2012 from 18.7 per cent in 2011. We expect the refinance rate to end 2012 at 9 per cent, down from 11 per cent currently, as the State Bank aims to boost growth,” the report read.