US dollar interest rates to head south

Deputy director of the State Bank’s Ho Chi Minh City branch office Nguyen Hoang Minh said dollar lending regulations would be revised in the Decision 09/2008/QD-NHNN dated April 10, 2008 on the lending in foreign currencies by credit institutions.

Accordingly, dollar loans will be prioritised to businesses importing essential goods for domestic consumption. Besides, banks lending in foreign currencies must assure they could take back the loans.

Industry specialists assume importers will find it difficult to source US dollar loans from banks, helping to drive down the demand for dollar loans from the business community as well as ease banks’ thirst for dollar deposits.

Dr. Tran Hoang Ngan, a member of the National Advisory Council for Financial and Monetary Policies said it was unfair to say that dollar supplies had failed to keep up with demand as greenback amounts businesses and local people deposited at banks exceeded $22 billion.

Ngan assumed that there was no reason to continue pegging dollar deposit rates at high levels.  

Eximbank was one of some pilot banks which made efforts to relax dollar deposit rates. Accordingly, from March 11, its ceiling dollar deposit rate stood at 5.35 per cent per year for 12-month deposits, 5.2 per cent for six-month deposits and 5 per cent for one-month deposits, slashing by 0.1-0.25 per cent compared to former levels.

Similarly, TienPhong Bank also downwardly revised the benchmark for dollar deposits. The interest rate for three to 36 month deposits was all relaxed to 5 per cent per year and that for one-month deposits was set at 5.2 per cent per year.

In respect to banks’ recent rush to raise up dollar deposit rates, Ngan said the move was followed banking authorities’ strong determination to keep Vietnamese dong ceiling deposit rate persistently at 14 per cent, per year.

In fact, upward revision of dollar deposit rates in early March 2011 occurred at some small banks and applicable to short-term deposits only. For example, at Navibank, one to three month dollar deposits enjoy from 5.3-5.52 per cent interest rate, per year while the rate for over 13 month dollar deposits was set at around 4.8 per cent, per year.