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Dollar interest rates to slide
US dollar interest rates are expected to slide in the coming months after the State Bank of Viet Nam tightened dollar lending rules last Friday.
"In the coming weeks, I think many banks will cut deposit and lending interest rates for the dollar," said Vo Thi Sanh, head of BIDV's Assets Liabilities Management Division.
"Most banks now have plenty of dollars, but they will have to restrict loans."
Under the regulation effective from May 9, only short-term funding will be extended to exporters, while importers can use all types of loans if they can confirm their ability to pay them back. The regulation aimed to stop the upward trend in US dollar interest rates occuring in early March after the central bank delivered strong messages to keep the Vietnamese dong ceiling deposit rate at 14 per cent per year.
Eximbank was one of the pioneer banks that cut dollar deposit rates. As of March 11, its ceiling rate was down 0.1-0.25 percentage point to 5.35 per cent for 12-month deposits, 5.2 per cent for six-months and 5 per cent for one-month.
BIDV cut its rates by 0.2-0.5 percentage points to 4.5 per cent for three-to-six month deposits and to 4.7 per cent for nine-36 month deposits. SeABank reduced dollar deposit interest by 0.1 percentage points, leaving interests ranging from 5.1-6 per cent for one- to 12-month deposits.
TienPhong Bank also lowered dollar deposit rates by as much as 0.25 percentage points. Interest rates for three- to 36-month deposits were all down to 5 per cent, and to 5.2 per cent for one-month deposits.
The highest rate for the dollar stands at 6.1 per cent, while the lowest is down to 4.5 per cent per year.
Given attempts to cut interest rates, some bankers assumed that the level of reduction would depend on the Government's efforts to tackle inflation.
"A lower inflation rate would help restore confidence in the domestic currency and then lift pressure on the dollar, which would help banks make further cuts in the dollar interest rate," said Nguyen Thanh Toai, Deputy General Director of Asia Commercial Bank.
In March, Viet Nam's inflation hit 13.89 per cent, the biggest annual increase in 25 months, despite monetary tightening and plans for scaled back fiscal spending.
The central bank has cut its target for credit growth from 23 per cent to 20 per cent this year.
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