While small banks in Vietnam are sitting on the knife-edge as depositors are withdrawing savings prematurely, big lenders are welcoming new capital flows without having to enter the interest rate race to keep and attract depositors. Capital is being mobilised, with big banks seeing a rise but small ones witnessing a contraction.
Big banks are happy
Big bank locations are serving a sharp increase in depositors in recent days. A lot of money from small banks is being channelled into big ones. A staff member at Vietcombank - Tran Quoc Thao Transaction Office in District 3, Ho Chi Minh City, said after the State Bank of Vietnam (SBV) issued Instruction 02/2011/CT-NHNN requesting banks to strictly follow the regulations on the ceiling interest rate of 14 percent per annum from September 7, as the competition for mobilised capital is not so fierce as before.
Mr Pham Thanh Ha, Deputy General Director of the Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), said deposit sources at Vietcombank or VCB are relatively stable and tend to grow from previous months, even after the bank has lowered its rate to 13.9 percent per annum.
Small banks are jittery
A small survey by Securities Investment Magazine showed that customers withdrawing capital outnumbered depositors in a transaction office of a small bank on Nguyen Dinh Chieu Street, District 3, Ho Chi Minh City in recent days. A lot of depositors withdrew their money prematurely to place it in bigger banks for security reasons, after ceiling interest rates were brought to 14 percent at all banks.
This situation is also seen in most small banks. After the State Bank of Vietnam showed its ironclad action in punishing a branch director of Dong A Bank in Tay Ninh province for breaching the ceiling rate regulations, all banks dared not apply deposit interest rates above 14 percent per annum.
Mr Bui Ngoc Minh Duc, Head of Capita Mobilisation Department, Western Bank, said the value of savings deposits at his bank has fallen 2 percent.
In search of new methods
Although small banks have repeatedly proposed the central bank apply different ceiling rates for different bank segments rather than the current one-rate mechanism, the central bank has steadfastly turned down their request.
In an effort to draw savings deposits, Saigon Commercial Bank (SCB) has adjusted its demand deposit policy under which the lender will record outstanding values of customers and add overnight rate of 12 percent per annum for personal customers and 8 percent for institutional customers.
More notably, Navibank (NVB) and Western Bank apply daily-term deposits with interest rate of 14 percent per annum to attract savers. The daily deposit policy brings the actual rate to over 15 percent per year.
Duc said Instruction 02 provided the ceiling interest rate of VND deposits, not deposit terms. Thus, such banks do not violate the rule. Indeed, many banks, both large and small, are applying interest rate of 14 percent per annum for short-term deposits. For example, VCB, ACB and Eximbank offer 14 percent on one-week deposits and if savers renew their deposits at maturity date, they will enjoy a real rate of higher than 14 percent per annum. And, the State Bank of Vietnam has not objected to this behaviour.
Vietnamese
