HCM City (VNA) – The State Bank of Viet Nam Governor, Nguyen Van Giau, has told commercial banks to limit their annual interest rate on dong deposits to 12 percent.
Ho Huu Hanh, head of the SBV’s Ho Chi Minh City branch, said the regulation would put an end to the recent flurry of activity by banks trying to outdo one another by offering higher interest rates on deposits.
To take advantage of competing interest rates, many customers have been withdrawing their money from banks and transferring it to banks with higher rates.
Techcombank had raised its annual interest rate to 14.2 percent, the highest among banks, an SBV official said, and last week DongA Bank’s rates went up to 13.56 percent and Viet A Bank, 13.92 percent. Following the State Bank rulling, Techcombank, SeA Bank and DongA Bank on February 27 complied immediately by lower rates.
Nguyen Tien Thinh, head of HCM City ’s representative office of Viet Nam Banking Association, said only a few days ago he witnessed a customer who wanted to withdraw 1,800 billion VND (112.5 million USD) and deposit in another bank.
On February 26, interest rates in the inter-bank market fell while interest rate at banks rose. The rise in interest rates at small banks has drawn customers away from major banks.
“We must increase the interest rate to keep out clients, but we don’t want to create problems on the market. We will agree to offer them the rate if customers ask,” one bank director, who declined to be named, said.
Interest rates on loans have also jumped to 15-16 percent, discouraging investors from borrowing money for production or trading projects.
Dang Van Thanh, chairman of Sacombank, said banks had raised rates on loans as interest rates on deposits rose.
Small-and medium-sized enterprises unable to issue stock or borrow money from commercial banks would suffer, several officials said.
“With a 15 percent rate on loans, small-and-medium sized enterprises could die,” one director of a foreign investment fund said.-Enditem
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