Vietnam sets another ceiling for dong deposits

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Báo Tuổi Trẻ English - 39 month(s) ago 6 readings

Vietnam sets another ceiling for dong deposits

Vietnam's central bank will impose a 6 percent ceiling on interest rates that banks pay for dong deposits with no terms or terms shorter than a month, in a move to try to avoid liquidity risks in the banking system.

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Vietnam's central bank will impose a 6 percent ceiling on interest rates that banks pay for dong deposits with no terms or terms shorter than a month, in a move to try to avoid liquidity risks in the banking system.

The ceiling on dong deposits with a one-month term or longer remains unchanged at 14 percent, the State Bank of Vietnam said in a statement issued late on Wednesday.

Several banks have raised dong funds with terms from 24 hours, two days, one week or two weeks, but still paid the maximum 14 percent annualized rate, which "contains risk with terms and liquidity for the credit institutions and the banking system", the statement said.

The new ceiling will come into force from Oct. 1, the statement said.

Banks in Vietnam have cut dong lending rates to 17-19 percent from as high as 24 percent following a call last month by the central bank to ease repayment pressures for businesses.

The move has made it difficult for smaller banks with limited funds, prompting many to seek more creative ways to raise deposits while observing the 14 percent ceiling in place since March 3.

Paying short-term depositors the maximum rate poses a liquidity risk to banks, which can face regular dong shortages. Unstable domestic gold markets and the country's rising import payments have also put pressure on the dong.

Vietnam has been battling some of the world's highest inflation and economists say years of soaring credit growth to achieve a fast economic growth has been a key contributing factor.

Targets for money supply and credit growth have been trimmed at least twice this year, and a resolution after the September cabinet meeting earlier this week urged the central bank to check credit growth at 15-17 percent and curb money supply expansion to 12 percent this year.

Previously, the official targets were to keep credit at under 20 percent and money supply in the 15-16 percent range.

The government has set a preliminary target for the economic growth to accelerate to 6.5 percent in 2012, from a projected 6 percent this year, an annual target that has been cut from 7.0-7.5 percent to help control inflation.

The growth target for 2012 still needs approval by the National Assembly, which will convene from late October to discuss socio-economic targets for next year.

The Southeast Asian nation's economy grew 5.76 percent in the first nine months of this year.

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