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SBV uses a sharp knife to chop down interest rates
Commercial banks all have stopped the programs on mobilizing capital from the public at negotiable interest rates, after the Governor of the State Bank of Vietnam late last week threatened to dismiss managers of the banks which offer the interest rates higher than 14 percent.
On September 8, all the clients coming to the branch of a state owned bank in Dong Da district in Hanoi, were told that they would enjoy the interest rate of 14 percent at maximum for all terms of deposits and all sums of deposits, no matter how big the deposits were.
The head of the bank branch gathered all officers of the branch earlier in the morning and informed that the bank will not apply negotiable interest rates any more, stressing that the new policy will be applied to loyal clients as well.
The “interest rate negotiable policy” means that commercial banks and depositors could negotiate the deposit interest rates, even though banks quoted the highest interest rate at 14 percent as instructed by the central bank.
Just several days ago, bank officers were urged to contact depositors to persuade them to extend their due deposits by offering the high interest rates of 17-18.5 percent. Meanwhile, banks now unanimously offer the interest rate at 14 percent at the highest, even though when depositors threaten to withdraw money.
Lan, who lives in Dong Da district in Hanoi, said that one week ago, the credit officer of a bank branch on Xa Dan Street offered her the interest rate of 18.5 percent for the deposit worth 200 million dong. However, on September 9, the bank officer called her again to say that the interest rate he offered last week has become invalid.
The officer said that since the State Bank of Vietnam now takes regular inspection tours to banks, and banks’ managers will be sacked if the inspectors find the signs of mobilizing capital at overly high interest rates.
The credit officer of a bank branch on Nguyen Luong Bang street has also said that the branch has stopped contacting with depositors via phones, and that the negotiable interest rate mechanism has stopped.
In fact, the ceiling interest rate mechanism has been set up by the central bank since March 2011, after the central bank released the Instruction No 01, stipulating that the credit growth rate in 2011 must not be higher than 20 percent, and the deposit ceiling interest rate must not be higher than 14 percent.
However, the decision had been ignored by commercial banks until the Governor threatened to sack the managers of violating banks. The State Bank, in its latest report, admitted that the ceiling interest rate of 14 percent had not been respected.
Trinh Van Tuan, General Director of OCB, said that right after returning from the meeting with the Governor of the State Bank on the afternoon of September 7, he has ordered branches and transaction offices to stop applying high interest rates.
Other bankers have commented that the central bank has used the “sharp knife” to cut the interest rates down. Therefore, no bank manager would risk his life to continue mobilizing capital at high interest rates.
The 12 biggest banks, which are holding 80 percent of the market share, have committed to force the interest rates down to 14 percent. Meanwhile, the other 20 percent, which find it more difficult than big banks to mobilize capital from the public, can seek capital from the interbank market or the refinancing from the State Bank.
A banker has affirmed that the interest rate reductions would not lead to the decreases in the bank deposits in the time to come. If all the banks respect the ceiling interest rate mechanism, depositors cannot be too demanding, because they do not have many choices for their deposits.
If the central bank successfully cuts down the deposit interest rate to 14 percent, the plan to slash the lending interest rates to 17-19 percent proves to be within reach.
vietnamnet, VnExpress
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