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High deposit interest rates not a concern
The highest VND deposit interest rate has officially exceeded the 10 percent per annum threshold. However, experts believe that high deposit interest rates should not be seen as a worrying thing.
The HCM City Housing Development Bank (HD Bank) has announced a 0.5 percent increase in its deposit interest rates, applied as of June 16. The highest rate now offered by the bank is 10.1 percent per annum, applied to 36-month term deposits.
HD Bank has been the bank leading the interest rate adjustment movement in the last five months in the banking system. It was also the first bank that applied the one-time record high interest rate of 9.8 percent per annum.
Prior to that, An Binh Bank late last week launched a new capital mobilisation programme, offering the interest rate of 9.99 percent per annum at the highest.
Besides HD Bank and An Bin Bank, VietBank has also raised deposit interest rates by 0.15-0.4 percent for 9-36 month term deposits and by 0.1-0.15 percent for shorter term deposits (1-6 month). The new rates have been applied since June 15.
The State Bank of Vietnam has reported that VND deposit interest rates offered by credit institutions have increased by 0.2-0.4 percent.
The average interest rate in the interbank market is now tending to increase by 0.03-1.92 percent per annum. The average interest rate for one-year term deposits is 8.37 percent per annum, up by 1.92 percent over last week. The average overnight interest rate is now 5.97 percent, up by 0.03 percent. The rates of other term loans are hovering between 7 percent and 8 percent.
With deposit interest rates continuously reaching new heights, the gap between deposit and ceiling lending interest rates has been narrowed to 0.4 percent for normal loans.
However, banks can get higher profit margins with consumer loans, as no cap on lending interest rates is set. The State Bank of Vietnam has said that the lending interest rate for this kind of loan has reached 16.5 percent per annum.
Several days ago, some analysts gave warnings about a new interest rate race which could cause banks to suffer.
However, many experts say banks are acting reasonably. Commercial banks anticipate that inflation will be higher in the time to come, which also means that deposit interest rates will have to go up in order to ensure real positive interest rates for depositors. Therefore, banks have been trying to take full advantage of the current conditions, when inflation remains low, to mobilise capital.
If banks can mobilise long-term capital, the capital will turn into low-cost capital in the future, when inflation is higher than now. That explains why commercial banks now try to mobilise long-term capital by offering high interest rates for long-term deposits, while offering 8-8.5 percent only for short-term 3-6 month deposits.
Some commercial banks anticipate that when the inflation is higher than now, long-term depositors may want to withdraw capital before the deposits mature. Therefore, some banks do not allow depositors to withdraw money early, while others only give high interest rates with some conditions.
For example, An Binh Bank is offering the high interest rate of 9.99 percent per annum, but depositors have to deposit 999 million dong at least for 369 days, or deposit 99 million for 900 days.
Tran Xuan Huy, General Director of Sacombank, said that the high interest rates mean high demand for capital, which shows that the national economy is recovering. Banks have anticipated the rise in people’s consumption demands; therefore, they have been pushing up capital mobilisation to meet the increasing demand.
Banks have been loosening conditions for consumer loans
As demand remains low, banks have to loosen conditions for consumer loaning. Previously, banks required borrowers to prove how they were going to spend capital. However, South East Asia Bank has launched a consumer loan programme, under which borrowers can borrow up to 500 million dong, while they do not have to declare how they intend to use the capital. The only thing they have to do is to prove their debt payment capability.
Moreover, borrowers do not have to mortgage assets under their names; they can mortgage the assets of parents, relatives and friends.
VietNamNet, VTC, TT
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