VietNamNet Bridge – Despite the profuse liquidity and slow credit growth, banks still have raised the deposit interest rates for fear that they may lose customers to other banks.
When the State Bank of Vietnam decided to impose the ceiling dong deposit interest rate at 9 percent one week ago, analysts affirmed the downward trend of the interest rate performance. Especially, commercial banks offered the low interest rate of 9 percent per annum at maximum for long term deposits (more than 12 month term deposits), even though no ceiling has been set up on long term mobilized capital.
At that time, banks affirmed that they would not be foolish to pay high for deposits any more, because their capital has become profuse, while the lending has been going very slowly, because not many businesses are eligible for accessing loans.
Therefore, the move by the banks to raise the deposit interest rates in the last few days has surprised many people. On June 14, the interest rate jumped to over 10 percent, while some banks offered 14 percent per annum.
Nguyen Thanh Toai, Deputy General Director of the Asia Commercial Bank ACB, has affirmed that the bank’s mobilized capital has been increasing steadily, but it still has to raise the deposit interest rate to 12 percent per annum.
“Other banks have raised interest rates for long term deposits already. Therefore, we have to adjust the interest rate in order to retain depositors,” Toai said.
However, Toai is not sure if ACB would raise the deposit interest rates further in some days, saying that the bank would make decisions after considering the market conditions.
“If the market interest rates go up further, we would not be the outsiders of the interest rate race. The interest rates would go up until they are unbearably high for banks and they would have to give up the race,” Toai said.
La Huu Nghia, Deputy General Director of SCB, has noted that since the day the State Bank released the new decision on the ceiling interest rate, the long term capital mobilized by the bank has increased slightly.
“We now offer 12 percent at maximum to depositors, because we have to compete with other banks,” he explained.
President of OCB Bank Trinh Van Tuan has also affirmed that banks have raised the interest rates not because of the capital shortage.
The problem is that banks could only find short term capital, and now they want to mobilize long term capital to balance the capital structure. And in order to do that, they have to raise the deposit interest rates.
Also according to Tuan, though banks can decide the long term deposit interest rates themselves, they still have to consider the moves of the rivals.
“If other banks of the same class increase interest rates, we will have to raise interest rates as well, or we fail to attract capital,” he said.
However, Tuan stressed that the interest rate race would not last for long time. “Banks would die if they have to pay high to mobilize capital, but cannot lend,” he said.
“The interest rates should hover around 11 percent for now, and drop to 8-9 percent in the future,” he added.
VP Bank’s General Director Nguyen Hung also thinks that the deposit interest rates should be between 10-12 percent, while the lending interest rates are 14-15 percent per annum.
Meanwhile, well-known economists, including former Governor of the State Bank Cao Sy Kiem, have called on the State Bank to remove the ceiling interest rate mechanism.