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Deposit interest rates unexpectedly rose
After several months of racing to slash interest rates, banks have begun raising the deposit interest rates in order to retain depositors. Besides, banks need to increase ‘collecting’ capital to prepare for the Government initiated demand stimulus program.
VP Bank and Ocean Bank were the two banks that ‘opened fire.’ VP Bank has raised the deposit interest rates for all term deposits, with the lowest increase at 0.15% per annum (3 and 4-month term deposits) and the highest increase at 1% (36 month term deposit).
Depositors now enjoy the highest interest rate at 8% per annum if they make 36 month term deposits.
Ocean Bank has only adjusted the interest rates for the 9-month and longer term deposits with interest rate increases of between 0.2% and 0.7%. The highest interest rate the bank is offering is 8.2% per annum, applied to the 12-month term and longer deposits
A common trend in the interest rates applied by the two banks is that the higher interest rates are offered for the longer-term deposits, which proves to come in regular laws in the context of the stable market.
Last year, when the market faced liquidity problems, banks applied higher interest rates for shorter-term deposits, while the highest interest rates were applied to 3-9 month term deposits.
Explaining the rise of interest rates, Nguyen Thanh Binh, Deputy General Director of VP Bank, said that the bank needs to prepare capital to meet the demand for loans from clients. VP Bank plans to reserve VND6 trillion for loans under the Government’s demand stimulus plan. The bank has disbursed VND300 billion so far this month.
The VND interbank interest rates last week seemed to increase only slightly in all terms of deposits; however, the increases were modest, less than 0.1% per annum. The 1 month term saw the highest increase of 0.85% per annum, while the 12 month term interest rate was the highest, at 8.17% per annum.
General Director of Lien Viet Bank Nguyen Duc Huong said on February 21 that the bank had not adjusted the deposit interest rates yet, but the bank will keep a close watch over the market performance in order to make suitable decisions.
Huong believes that raising deposit interest rates is necessary for all banks, especially as they are joining the Government’s demand stimulus program. Besides, banks also need to raise the deposit interest rates because they fear depositors may withdraw capital from banks once the interest rates are too low and unattractive.
“There have been signs of clients withdrawing deposits from banks to pour money into other investment channels, like real estate, gold and foreign currencies. The massive capital withdrawal may occur with any banks if they keep low interest rates,” Huong said.
VietNamNet, VNE
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