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State bank moves to reel in interest rates
The struggle to contain inflation has become a struggle to control through-the-roof interest.
The central bank aims to stop lenders from increasing deposit interest rates by offering them long-term loans and ordering banks to prove that they have the money to pay over 18 percent annually.
In an attempt to slow quickening inflation, the State Bank of Vietnam (SBV) last month raised the base interest rate to 14 percent per year from 12 percent, allowing commercial banks to move deposit and lending interest rates up to 21 percent per year.
Now, to halt a series of deposit interest rate hikes, the SBV announced last week it was planning to give commercial banks billions of dong in long-term loans at 15 percent annual interest.
Also last week, the state bank ordered lenders offering deposit rates of more than 18 percent per year to submit their business plans this year in a bid to penalize those whose plans could not cover business expenses.
Since Monday, only one bank raised its rates above 18 percent but Saigon Commercial Bank and Nam
Viet Bank are still offering rates of around 19-19.4 percent per year on one-year-or-more deposits.
Few customers are opting for long-term deposits.
Asia Commercial Bank general director Ly Xuan Hai said some banks did not want to raise deposit interest rates but had to do so once other banks raised their rates.
Hai said many banks’ deposits had not actually climbed after the increases as many depositors had simply moved their money around from bank to bank.
He suggested that deposit interest rate should be fixed at 16-17 percent per year.
Many private banks have said they would wait to see what other lenders did before deciding whether or not they would cut their deposit interest rates.
A HCMC commercial bank director who asked not to be named said private banks would consider cutting deposit interest rates if the state bank lowers its reserve requirement.
But analysts said it was too early to consider downsizing banks’ reserve requirement as the central bank needed to release tightened monetary policies to battle inflation.
Figures from the General Statistics Office in Hanoi showed that consumer prices had risen 26.8 percent last month since a year earlier, the biggest jump since 1992.
The rate was measured at 25.2 percent in May.
The Bank for Investment and Development of Vietnam, known as BIDV, said it would cut lending interest rates by 0.2 percent per year from July 9 to December 31, according to the SBV’s website.
The Hanoi-based bank’s move would make other lenders reconsider their deposit and lending interest rates, said Dr. Le Xuan Nghia, director of the SBV’s Banking Development Strategy Department.
Nghia predicted deposit interest rates would fall to 16-17 percent per year as inflation slows in the near future.
“Once inflation is under control, the central bank will most likely reduce the reserve requirement, enabling commercial banks to cut lending rates sharply,” he said.
Thanhnien
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