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US$ interest rates surprisingly going up
While VND deposit interest rates are tending to decrease and the US Fed has slashed the basic interest rate sharply, local bankers are considering increasing US$ deposit interest rates as they are worried about the possible decrease of mobilised US$ capital as the demand for US$ loans remains high.
Though VND lending interest rates have been decreasing, the rates remain overly high for businesses and are still keeping them away from VND loans. This explains why businesses prefer US$ loans.
Meanwhile, depositors now prefer to make deposits in VND over deposits in US$ thanks to the higher VND deposit interest rates and the stable VND/US$ exchange rate. This trend has raised the concern that US$ deposits will dwindle, resulting in banks being short of US$ capital.
Ly Xuan Hai, General Director of Asia Commercial Bank (ACB), said that the bank is considering raising US$ deposit interest rates again. The highest deposit rate the bank is now offering is 5.5% per annum.
Prior to that, on October 8, Eximbank decided to raise US$ deposit interest rates sharply after a series of cuts. The current highest rate is 6% per annum for 6-month term deposits, well higher than the rates being offered by small- and medium-size banks.
As such, the interest rates applied by Vietnamese commercial banks are some 5 times higher than the FED’s rate. Eximbank’s representative said that the bank has to raise US$ deposit interest rates because it needs more US$ capital to meet the demand of businesses, which is expected to increase towards the year's end.
In fact, banks cannot easily provide US$ loans for clients because the State Bank of Vietnam promulgated strict regulations on the entities eligible to take out US$ loans.
Banks, therefore, have launched programmes on loaning in VND but at US$-loan interest rates. ACB announced a $50mil programme for export companies to borrow VND at US$-loan interest rates.
Do Minh Toan, Deputy General Director of ACB, said that the demand for capital is increasing towards the year's end, while businesses prefer US$ loans at the interest rates of 6.5-10%, while VND loan interest rates may be as high as 20-20.5%.
Currently, VND deposit interest rates are triple US$ rates (17% per annum vs 6%). Meanwhile, the greenback value is on the decrease, prompting people to keep VND instead of dollars.
According to the HCM City Statistics Agency, the total capital mobilised by banks in the city by the end of September 2008 was VND542tril ($33.87bil), up by 27.2% over the same period of last year, and up by 11.3% over the beginning of the year. The mobilised capital in foreign currencies accounted for 29.9% of the total mobilised capital. Meanwhile, the outstanding loans reached VND484tril, up by 45.2% over the same period of last year, and up by 19.1% over the beginning of the year. Outstanding loans in foreign currencies accounted for 28.7% of the total outstanding loans.
VNN
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