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Overnight rates rise as banks meet reserve targets
Interest rates for overnight dong loans on Vietnam’s interbank market rose in the past week as banks sought more funds to meet end-of-the-month reserve requirements, bankers said Monday.
They said banks were offering as much as 6.8 percent per year for the overnight dong loans, up from an average of about 5.5 percent at the end of last month.
“The market usually tightens at the end of each month due to the central bank’s reserve requirements but liquidity should improve soon after,” a banker in Ho Chi Minh City said.
Bankers also said a number of banks have started to raise interest rates on dong deposits, especially on the longer tenors with several offering rates exceeding 10 percent per year on their 2-3 years deposits as they competed to lure more funds to meet higher demand especially from the consumer finance sector.
Under the current central bank-regulated base rate of 7 percent, banks are only allowed to pay interest rates at maximum 10.5 percent per year.
But banks are allowed to set their rates on consumer loans outside the cap of 10.5 percent, enabling them to set deposit rates as high as 10.2 percent to compete for dong funds.
Last week, the State Bank of Vietnam said it would keep the base rate unchanged at 7 percent this month.
It has also said it planned to keep key interest rates for the dong stable in the second half of 2009, after annual inflation this month sank to its lowest level in more than five years.
Vietnamese banks lent VND372.3 trillion (US$21 billion) to businesses as part of the government’s loan-subsidy program as of July 2, the central bank said on its website late last week.
The nation is offering about VND17 trillion ($1 billion) in subsidies to encourage banks to lend at preferential interest rates.
thanhnien, reuters
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