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Banks still running interest rate race
Banks are struggling to match up to the returns gold and foreign currencies are providing despite offering benchmarks as high as 15 per cent.
VND deposit interest rate increases, still outstripped by inflation
Banks have been finding it tough to secure capital since the beginning of the year, as investors look to other avenues to offset soaring inflation.
The consumer price index (CPI) increase of 15.96% in the first five months of the year and the average deposit interest rate of 15% has left banks with their hands tied as investors increasingly opt to go with gold and foreign currencies. As a result, the demand for foreign currencies has increased dramatically and the VND/US$ exchange rate has soared to over VND17,000/US$1.
In order to compete, banks have decided to enter a new interest rate race, raising deposit interest rates further still.
On May 29, Sacombank, - the country’s largest bank - announced new rates. The rate is 14 per cent annually for over 13-month term deposits, and 14.1-14.4% per annum for less than 12-month term deposits. Deposits of more than VND20mil, will receive the additional interest rates of 0.28-1.8% per annum.
Sacombank also announced to accept deposits in gold at 3.6-5.5 per cent for 1-36 month term deposits. This was the third time since May 19, 2008, when the ceiling interest rate scheme was removed, Sacombank bumped up its rates.
Also on May 29, OCBank, for the fourth time since May 19, announced an increase to 15.36% for 12-month term deposits.
On May 30, Eximbank, for the fourth time, raised deposit rates for all terms at a ceiling of 15.3%.
Nam A Bank is now offering 15.6 per cent per annum for 3-12 month term deposits, while SCB is offering 16 per cent per annum and SeABank is ahead of the pack with a 16.5 per cent rate for 14-month terms. There has been no sign that shows the end of the interest rate race.
Tran Phuong Binh, General Director of Dong A Bank, said that banks have no other choice than raising deposit interest rates. If they don’t, capital will flow to other banks or to the gold and foreign currency markets.
Greenback interest rate hits 8%
Banks are also finding it difficult to secure greenback deposits. Sacombank on May 29, announced a bump on 6-month term deposits to 7 per cent and an increase in shorter term deposits to 6.5-6.9 per cent. Deposits of $5,000 and above will get a bonus of 0.05-0.3 per cent.
ABBank also offers attractive interest rates, with the highest peaking at 7.6 per cent yearly, breaking the record rate offered by Techcombank’s 7.5 per cent. SCB is now leading the market in terms of dollar deposit interest rates at 8 per cent. The rates offered by Vietnamese commercial banks, are now 6% higher than the US Federal reserves basic interest rate.
VNN
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