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Depositors laugh all the way to the bank, borrowers cringe
With banks being allowed to set their own interest rates, they have hiked deposit rates to mobilize funds and raised loan rates to ensure they don’t make losses.
While depositors are reaping the rewards of the central bank’s decision to scrap the cap on interest rates, borrowers face a brutal interest rate regime.
The State Bank of Vietnam last month jettisoned a 12 percent deposit interest cap, and gave commercial banks the freedom to set both loan and deposit interest rates at up to 150 percent of the benchmark rate of 12 percent.
Banks immediately raced to raise deposit rates to mobilize funds and fixed loan rates accordingly.
A deputy director of a commercial bank, who asked not to be named, said despite raising the lending interest rate to the 18 percent brim, banks also have to charge fees since deposit rates of 15-16 percent mean the spread is meager.
“We will suffer losses if we lend at 18 percent since 20 percent of the deposits have to be maintained as reserve balances with the central bank,” he said.
But this means borrowers end up paying exorbitant rates.
A customer at a HCMC private bank said he got a loan at 18 percent plus a fee of 4.2 percent per year for a five-year, VND200 million (US$12,500) loan.
“I have to pay a fee of VND42 million, or 21 percent of the total value of the loan, immediately after getting the loan,” he told Thanh Nien.
“It means I get only VND160 million ($10,000) but still have to pay interest on a VND200 million loan.”
A shipping firm said a bank has agreed to provide a loan at a fair rate of 17.52 percent but it has to pay a so-called capital mobilization fee of 0.35 percent per month.
Banks collect these fees not only for new borrowers, but also existing clients.
“It’s necessary for the government to tighten monetary policy to battle the accelerating inflation,” Dr. Tran Hoang Ngan of the HCMC Economics University said.
“But banks shouldn’t charge fees. They should support companies more at this difficult time.”
He also suggested the central bank should pay banks interest on the reserves they maintain or reduce the reserve requirement.
Banks, striving to attract deposits, have not only raised deposit interest rates but also launched many promotions.
Eximbank has a “Call 48 hours” program, which offers 11.5 percent per year for deposits for 48 hours on amounts of VND100,000 and above.
Dong A Bank offers bonuses for deposits of VND50 million to VND10 billion ($3,100 – $620,000).
A HCMC customer said he makes profits every day since his bank offers a bonus on demand deposits.
But state-owned banks are offering slightly lower rates of 14.4-15 percent per year.
Thanhnien
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