Banks accept even lower cap on deposit interest

HCM CITY — Deposit interest rates were capped at 14 per cent annually on Wednesday after an agreement was reached among commercial banks and the State Bank of Viet Nam on Tuesday.

Under the agreement, banks lowered the ceiling deposit rate from 15 per cent to 14 per cent, which includes all kinds of bonuses.

The agreement was a move to put the interest rate race under the control, said the central bank.

Violators of the agreement will be sanctioned, and directors of bank branches that seriously violate the agreement will be sacked.

The State Bank said the new rate was a temporary cap that could be adjusted when inflation is curbed.

Many banks, including Sacombank and DaiABank, had lowered deposit rates to 14 per cent annually on Tuesday.

But the 14 per cent rate was provided for short-term one to three month deposits of at least VND10 billion. Deposits of less than VND50 million received interest rates of 13.98 per cent.

Tran Son Nam, general director of Dai Tin Bank, said with the new cap rate for deposits, commercial banks would also have to adjust lending rates.

Nam said lending rates would drop to 18 per cent, 2 to 3 per cent lower than the current rates.

A manager of a bank branch in District 1, who declined to be named, said at this time of the year most banks earkmarked their deposits for year-end liquidations which would be finalised after the Tet (lunar new year) holiday in early February.

He said this was why high interest rates were set for one- to two-month deposits. For longer-term deposits, the rate was from 12 to 13 per cent annually.

According to Tran Hoang Ngan, deputy director of HCM City University of Economics, if inflation is at 11 per cent, the deposit rate of 14 per cent is "reasonable".

Ngan said this high rate could be maintained to the end of the first quarter of next year, before being cut when the country's macro-economy would be stabilised and inflation better controlled.

Do Minh Toan, deputy general director of ACB, said the high deposit rate offered banks a good opportunity to give priority (low-interest loans) given to corporate customers and higher rates to individual clients.

Lending rates for individual customers at banks such as DaiABank and HDBank range from 17.5 per cent to 20 per cent annually.

Experts said high lending rates of 20-21 per cent could discourage individual customers from getting bank loans to purchase imported luxury consumer goods, thus contributing to efforts to curb inflation. —VNS