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Deposit interest rate adjustments perplexing depositors
Commercial banks have continuously adjusted VND and US$ deposit interest rates, thus creating a new interest rate ground. Now people don’t know whether they ought to open VND or US$ deposits.
Nguyen Tien Dung, the owner of a woodwork shop in Hanoi, related that he has earned a big sum of money from securities investment deals and he wants to deposit some of the money at banks as he believes this is the safest channel.
However, as bank deposit interest rates have been adjusted regularly recently, Dung is confused and cannot decide whether he should open a VND or dollar deposit.
VND and US$ interest rates significantly adjusted
According to the State Bank of Vietnam, a lot of commercial banks last week raised VND deposit interest rates sharply, including Sacombank, Techcombank, Eximbank, Military Bank, DongA Bank, Tin Nghia bank and HD Bank, which raised deposit interest rates by 0.2-0.5 per cent per annum compared to early June.
The central bank has reported the average VND interest rate of state-owned banks for less than one-year term deposits at 7.52 percent for 3-month, 7.71 percent for six-month and 8.05 percent for 12-month term deposits.
Meanwhile, VND deposit interest rates applied by joint-stock banks are 7.91 percent for 3-month term deposits, 8.19 percent for six-month and 8.42 percent for 12 month-term deposits.
The highest VND deposit interest rate now available on the market is 10.2 percent, which Tin Nghia Bank is offering for 36-month term deposits, applied as of June 17.
While VND deposit interest rates are on the rise, US$ deposit interest rates are on the decrease.
State-owned banks, in an effort to deal with an abundance of foreign currency loans, agreed in early June 2009 to slash US$ deposit interest rates.
The move by state-owned banks had been joined by many joint-stock banks by June 20, including DongA Bank, ABBank, VP Bank, Sacombank, Techcombank and Military Bank.
According to the State Bank of Vietnam, by June 17, the US$ interest rate had been slashed by another 0.2-0.4 percent per annum.
Quick reports by credit institutions showed that on June 16, the VND interest rates in the interbank market had increased over the previous week by 0.12-0.21 percent per annum. Meanwhile, the average US$ interest rates of short-term loans in the interbank market is tending to decrease slightly with the highest rate now at 2.09 percent per annum.
VND is wise choice
Dao Trong Khanh, General Director of Tien Phong Bank, said: “If comparing the VND and US$ interest rates at this moment, and considering the possible VND/US$ exchange rates, it would be better to deposit VND instead of dollars.”
Agreeing with Khanh, the deputy general director of a joint-stock bank said that as US$ interest rates are on the decrease, the attractiveness and profitability of the dollar will decrease. As such, enterprises and people will shift to keep VND and other assets.
“The highest US$ interest rate has dropped to 1.5 percent, while VND rate is at 8 percent per annum. If the exchange rate drops by no more than 6.5 percent, it would be more profitable to keep VND,” he said.
The fact that the dollar has been depreciating in the world’s market recently has made many people think that the dollar will continue sliding in price in 2010.
However, Cao Sy Kiem, former Governor of the State Bank of Vietnam, said that one should not think that the dollar will slide sharply. He said that in Vietnam, there exists a high risk of the return of high inflation. Therefore, banks should be cautious when adjusting interest rates, since any sharp adjustment could cause bad consequences.
“I think that keeping VND would be more profitable than dollars in the short term. Meanwhile, in the long term, the dollar still proves to be the currency which promises high potential and safety,” Kiem said.
The central bank has affirmed that it will keep the same VND basic interest rate and keep the exchange rates stable until the end of 2009.
VietNamNet, TBKTVN
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