VND interest rates on the increase, market scorching hot

VNStockNews.com - Banks’ race to raise deposit interest rates continues and shows no signs of cooling down, despite the fact that the State Bank of Vietnam has decided to keep the basic interest rate unchanged at 7% for September 2009.

Several days ago, local newspapers reported that long-term deposit interest rates were being raised by commercial banks after being told by the State Bank of Viet Nam that they could only use 30% of mobilised short-term capital for long-term loans instead of 40% as previously.

However, in fact, banks have raised interest rates on long-term deposits as well as they need capital to disburse for signed credit contracts.

HD Bank late last week raised the interest rates on all kinds of short-term deposits (less than 12-month). The latest adjustments have pushed the bank’s deposit interest rates up by 0.1-1% over the previous levels. As such, its special credit products of 4-12-month term deposits now have the interest rates of between 8.85 and 9.35%.

Additionally, HD Bank is still leading the market in offered interest rates for 15-month, 24-month and 36-month term deposits, with the interest rates of 9.4%, 9.8% and 10.3%, respectively. However, the biggest interest rate adjustment has been made to demand deposits, with a 1% increase, which has pushed the interest rate up to 7.2%. This is the highest rate offered now on the market.

OCB has also announced the increases of between 0.2 and 0.4% per annum for VND interest rates on all terms of deposits, except 24- and 36-month term deposits. With the move, the 13-month term deposit now enjoys the interest rate of 9.3% instead of 8.9%, while 18-, 24- and 36-month term deposits now have the rates of 9.4, 9.5 and 9.8%, respectively.

Other banks, though having not announced interest rate increases, have launched promotion programmes in order to mobilise more capital as their capital demands have become increasingly high.

Big commercial banks have applied different ways to mobilise long-term capital. With the issuance of 10-year-and-one-day bonds, the Bank for Investment and Development of Viet Nam has successfully mobilised 1,362 billion dong worth of long-term capital at the interest rate of 10.5% per annum to be applied for the first five years.

The interest rate has hit the ceiling lending interest rate of 10.5%.

Meanwhile, Vietcombank has set up floor interest rates for different terms of deposits. 12-24-month term deposits have the floor interest rate of 8.5% per annum, while over 24-month term deposits have the interest rate of 8.8% per annum.

The State Bank of Vietnam in late August 2009 decided that the basic interest rate would remain unchanged at 7 percent per annum, which means that the ceiling lending interest rate will be kept at 10.5%. The 7% basic interest rate has been kept stable since January 2009 when the Governor of the State Bank of Vietnam lowered the rate from 8.5 to 7%.

The central bank decided to leave the basic interest rate at 7% after considering that Vietnam needs to strive for the economic growth rate of 5% in 2009 and control consumer price increases.