Vietnam Banks Racing to Raise Savings Interest Rate
Vietnamese commercial banks have been racing to increase deposit interest rates and limited loans since the central bank decided to raise three key interest rates 14 days ago.
The new wave of increasing interest rates, similar to a trend occurred in late 2007, is expected to help local lenders cope with the dong capital shortage.
Hanoi-based VIB Bank now offers the highest interest rates for VND deposits of different terms after it announced it would raise interest rates by 0.12 per cent-0.24 per cent.
The interest rate for 12-month term deposits applied by most banks has reached 9.6 per cent per annum, while some offer 10 per cent per annum. Some of the banks have raised interest rates twice within one month.
The race will become fiercer and fiercer as more banks become operational in the coming months.
Late comers on the market always have to attract clients by offering higher interest rates, a local state-run newspaper explained, saying that nearly 200 applications for setting up banks are awaiting the State Bank of Vietnam’s approval.
In the near future, six foreign banks will establish branches and five licensed banks will become operational, the source added.
It also stressed that the difficulties in mobilizing capital have forced several banks to limit lending, especially the funding of real estate investments.
At the end of 2007, many commercial banks announced they would reserve VND200 billion-VND300 billion for consumer lending with no mortgage required. However, some banks have stopped disbursing for these programs because they cannot find enough capital.
Limiting lending is actually worsening the problem, which will surely affect the business performance of local banks, whose earnings come mostly from credit operations. (Vietnam Economic Times)
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