Vietnam Should Maintain Ceiling Deposit Rate: NA Economist
The State Bank of Vietnam should maintain the ceiling deposit interest rate of 10.5% to stabilize domestic monetary market, state media reported, citing an economist from the National Monetary Policy Advisory Council.
Tran Du Lich, a member of the council, said that liberalizing deposit interest rates may ignite an interest rate war among banks, especially small lenders which are now seriously hurt by capital shortage.
If the ceiling is removed, small lenders are likely to raise the deposit interest rates to as high as 15% per annum and capital will flow into them from larger ones, causing a mess on the financial market, Lich warned.
Lich called on the central bank to strictly fine any banks which have dodged the rule on the ceiling deposit interest rate and to allow local banks to apply negotiation-based scheme on short-term loans, apart from the medium- and long-term ones.
The central bank should use a fixed ceiling rate for deposits for every quarter instead of lifting it, Lich proposed.
Local commercial banks have tried to wiggle around the 10.5% cap on deposit interest by unlawfully adding various promotions that had brought the real interest rates to 13% per year
A senior central bank official who asked to be unnamed earlier said that deposit interest rates are still positive as inflation is forecast at 7% this year.
Adjusting them at this time will send negative signals to the market and current law does not allow central bank to liberalize interest rate, the official added. (Liberated Saigon)
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