Banks vow to cut deposit interest

HA NOI — Member institutions of the Viet Nam Banking Association have committed to cutting deposit interest rates by up to half a percentage point to a maximum of 11-11.2 per cent starting Monday and have made a vow not to offer promotional cash or bonuses to attract depositors.

"Members have agreed to keep deposit rates at 11 per cent per year, plus-or-minus 0.2 percentage points," said the association's general secretary, Duong Thu Huong, adding that the move would help banks improve their profit structures.

Some major banks, including the Bank for Investment and Development of Viet Nam (BIDV), An Binh Bank and DongA Bank, started to immediately cut their rates yesterday, bringing the highest deposit interest rates they offer to 11.2 per cent per year for 24- and 36-month term deposits. Viet A Bank set its highest interest rate at 10.8 per cent for three-month term deposits. One- and two-month term deposits were set at 10-10.5 per cent.

All of these banks also began eliminating promotional cash gifts and bonus interest offers.

Bank leaders industrywide were expected to bring deposit interest rates to 10.2-10.5 per cent by late September to meet the Government's directive of deposit interest no higher than 10 per cent.

"I think such an adjustment and strategy are reasonable," Huong said. "It's impossible to make a sudden reduction to 10 per cent at this time."

There were some concerns that depositors might withdraw funds if interest returns fell below 11 per cent. Countering this idea, An Binh Bank deputy director Dam The Thai said, "The reduction will not impact the abilitity of An Binh Bank to attract capital if all banks comply with the agreement."

"Not everyone has the ability to invest," commented the deputy director of a HCM City-based bank, on condition of anonymity. "Keeping money at banks is still safe and effective."

In a parallel to cutting deposit interest rates, several commercial banks are now trying to slash borrowing cost for short-term loans.

Small- and medium-sized enterprises, exporters and producers of agricultural products may qualify for loans with interest rates of 12-12.5 per cent per year at some major State-owned banks, including Agribank, BIDV, Vietcombank, Vietinbank and the Mekong Housing Bank. The lowest lending rates at these banks are currently 14 per cent per year.

Private commercial banks like Habubank, Sacombank, Maritime Bank and Asia Commercial Bank have cut lending interest rates by an average of half-a-percentage-point to 12.5-13.5 per cent. — VNS