Banks lose interest in dong deposits

VNStockNews.com - Increased interest rates among commercial banks to attract more Vietnamese dong deposits have cooled, giving the market more stability from a few weeks ago.

Since early last month, many banks have raised their interest rates on dong deposits many times over. Some have even offered rates as high as 10.2 per cent per year against the cap of 10.5 per cent on lending interest rates regulated by the State Bank of Viet Nam (SBV).

To date, there have been only a few banks, including VIB and DaiABank, still lifting their interest rates on dong deposits; however, increase margins were slightly lower, and their interest rates were still less than 10 per cent.

The SBV also reported that there had been no significant interest rate changes in the monetary market since late June. According to the central bank, the average mobilising rate on dong deposits offered by commercial banks was currently at 8.13 per cent.

Nguyen Ngoc Bao, director of the SBV’s Monetary Policy Department, said that the increase of deposit interest rates made previously by some banks had not been significantly impacted by the market.

Industry insiders also said that banks did not continuously make interest rates rise, as the SBV had more than once expressed its decision to keep monetary policies stable until the end of the year. The SBV recently said that it would keep benchmark interest rates in July unchanged at 7 per cent per annum.

The move would keep commercial lenders effectively capped at a 10.5 per cent annual interest rate on loans made in dong.

The general director of a bank, who declined to be named, said that with a modest gap between interest rates on deposits and loans, commercial banks were facing narrower profit margins, adding that banks, therefore, were scrutinising any decisions to continuously raise interest rates.

Banks had also seen no opportunities for higher profit margins through the provision of lending services, including consumer loans, whose interest rates were agreed on by lenders and borrowers. The SBV has recently said that it would closely supervise this kind of lending, which had reported a rise of more than 11 per cent in the first half of the year. (VNS)