Banks lift interest lid 1 per cent
(29-04-2008)
HA NOI — The Viet Nam Banks Association (VNBA) yesterday announced a new 12 per cent lid on deposit interest rates in document No 171/HHNH-NV sent to commercial banks.
The new cap is effective from today. Twelve per cent interest, instead of 11 per cent previously, would be paid at the end of the term for dong deposits of six months and over. The new rate would apply to all mobilisation tools including certificates of deposit, bonds and savings.
Dong deposits of less than six months stand to earn 11.5 per cent interest a year, instead of 10.5 per cent previously, also payable at the end of the term. Meanwhile, deposits in the greenback will receive 6 per cent interest.
Initially, the new rates were approved by only 10 out of Viet Nam’s 38 banks. However, after much deliberation 37 out of the 38 banks approved the new caps, saying they were reasonable. VNBA explained that the new rates are a natural consequence of commercial banks’ lacklustre efforts to mobilise capital in the first quarter, up a modest 4.14 per cent from the end of 2007.
Since the implementation of the 11 per cent ceiling at the start of this month, the absence of liquidity has been a key concern.
The number of deposits has fallen while trillions of dong have been withdrawn from banks. Skyrocketing lending rates, tightened monetary policy and VNBA’s ceiling interest rates have left banks desperate for more deposits.
Many banks, therefore, are unlikely to maintain a rate of 11 per cent interest.
VNBA said the 12 per cent cap was necessary as inflation rises to 21.42 per cent year-on-year in April. The association hopes the new measures will aid a move towards a real positive interest rate.
In other news, the VNBA held a meeting yesterday to dicsuss the regulations governing bank’s promotional campaigns. Results of the meeting are pending. — VNS
