Banks raise deposit interest rate, upsetting businesses’ plans

  • June 30, 2015

The government’s efforts to slash lending interest rates to make it easier for businesses to access bank loans may have been in vain as banks have begun raising deposit interest rates.

Vietnam, deposit interest rate, VietinBank

The deposit interest rate has unexpectedly bounced back after months at a low point. State-owned commercial banks all have raised deposit interest rates by 0.2-0.5 percent per annum, which could trigger a new wave of lending interest rate increase. BIDV offers 4.5 percent per annum in interest rate for the 1-2 month term deposits, 5 percent for 3-month and 6.5 percent for 12-month term deposit.   VietinBank has raised the interest rates for short-term deposits by 0.5 percent. Vietcombank and Agribank pay the lowest interest rate in the market, 4 percent per annum for 1-month term deposit. Joint stock banks offer higher interest rates for deposits. HD Bank has raised the interest rate to 5 percent per annum for 1-month deposit from 4.7 percent, to 5.7 percent for 6-11 month term deposits.  The sharpest increase of 0.5 percent, from 6.5 percent to 7 percent, is seen with a 12-month deposit. Dong A Bank has also adjusted the interest rates for all kinds of deposits. Its 9-month term deposit has the sharpest increase, from 5.6 percent to 6 percent. OCB Bank’s CEO Truong Dinh Long said banks have to raise deposit interest rates because the capital mobilization has slowed recently, while lending has been growing well. An analyst noted that even state-owned banks, which have abundant capital and always keep deposit interest rates low, have also raised interest rates. Nguyen Hoang Minh, deputy director of the State Bank’s HCM City Branch, said the banks in the city tend to raise long-term deposit interest rates as medium- and long-term lending has been increasing rapidly in recent months, accounting for 54 percent of total outstanding loans. “What is happening shows the recovery of the production sector after several years of stagnancy,” Minh said. The interest rate hike will upset the government’s plan to stimulate the national economy by slashing lending interest rates. The State Bank earlier this year announced that it will force the long-term lending interest rate down by another 1-1.5 percent this year. However, analysts commented that the prospect seems to be far away. Do Thien Anh Tuan from the Fulbright Economics Teaching Program warned that the interest rate increases will increase the financial burden on businesses. “Interest rates of 12-15 percent will be fine for businesses if the market demand is strong and sales are good. But an interest rate of 9-10 percent will be too high if the market conditions are unfavorable,” he said. 

Source: VietNamNet

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