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Common deposit interest rate to hurt savers
Local commercial banks are considering working together to set a common deposit interest rate but experts have warned such a scheme would not be in the best interests of depositors.
Techcombank General Director Nguyen Duc Vinh said local commercial banks wanted to lower deposit interest rates to a mutually-agreed level so loan interest rates could also be reduced.
Vinh said the amount of cash banks had on hand – which was low earlier in the year – was now “good.” The economy had also stabilized somewhat recently, with the monthly inflation rate in September recording its lowest increase this year of 0.18 percent.
The state bank increased the interest rate it pays on reserves that banks are required to set aside to 5 percent from 3.6 percent from October 1.
The central bank also decided to allow credit organizations to use compulsory bills to secure loans from this month, which has helped increase their liquidity.
An official from the State Bank of Vietnam, who wished to remain anonymous, said the state bank encouraged commercial banks to adjust their interest rates to suit the prevailing level of inflation, the amount of cash circulating in the economy and the supply and demand of capital.
Banks should have a relative consensus on deposit rates to prevent “unhealthy” competition, which can cause savers to shuffle their funds between banks, threatening market stability, the official said.
However, other experts did not support the plan for banks to fix a common deposit rate.
An economist from the Central Institute for Economic Management, who did not wish to be identified, said he was afraid setting a deposit rate ceiling could hurt millions of depositors in Vietnam.
Commercial banks also had different financial capabilities, so each bank needed a different deposit interest rate, he said.
“When the market is stabilized, interest rates should be more market-based, instead of being determined by administrative measures,” he said.
Phan Duc Trung, chief executive officer of the fund management company FPT Capital, said a common deposit rate could help improve the local banking sector and the entire economy. But Trung said a common rate could also adversely affect many depositors.
Some foreign-invested commercial banks have recently lowered their deposit rates. HSBC Vietnam, a wholly-owned unit of Europe’s biggest bank HSBC Holdings, announced Monday it was lowering its deposit rates to 13-15.25 percent a year.
Vinasiam Bank, a venture between the Siam Commercial Bank of Thailand and Vietnam’s state-run Agribank, has set its deposit rates at 15-17.4 percent a year.
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LOANS STILL OUT OF REACH FOR MINNOWS
Despite lower borrowing costs, loans are still too expensive for many local businesses, especially small and medium enterprises (SMEs), local experts said.
Government economist Le Dang Doanh said it was hard for local SMEs to earn a profit of 30 percent to make loan repayments in the current troubled economic times.
Local lenders are also unwilling to loan to SMEs as they were under pressure from the government’s inflation-fighting measures. The government has capped banks’ credit growth at 30 percent and set a high compulsory reserves ratio. The central bank has set the official interest rate at 14 percent.
Vietnam Association for Small and Medium-Sized Enterprises (VASME) President Cao Sy Kiem, a former central bank governor, told a meeting last week that banks in Vietnam should lend to SMEs at an interest rate of 15 percent to help them survive.
About 20 percent of Vietnam's 350,000 SMEs, which account for 40 percent of the nation’s gross domestic product, have either gone out of business, are on the brink of bankruptcy or are in serious difficulty, he said.
VASME Vice President Nguyen Hoang Luu said more than half of local SMEs rely on loans from banks and other financial institutes to keep going. Doanh suggested the government set up a fund which would grant cheap loans to SMEs. The economy would pay a much higher price if large numbers of SMEs went bankrupt, he said. |
Thanhnien
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