Many commercial joint stock banks are still increasing interest rates in a bid to raise more deposits while the State Bank of Vietnam keeps the basic interest rate unchanged at 7 percent. This makes deposit interest rates of many banks nearly hit the regulated ceiling level of 10.5 percent a year.
Currently, in order to raise more capital, not only small joint stock banks but also large banks are actively boosting deposit interest rates. According to the central bank, many banks, both state-owned and joint stock have recently increased deposit interest rates by another 0.3 percent a year.
The central bank said that dong deposit interest rates of Bank for Investment and Development of Vietnam (Bidv), Bank for Agriculture and Rural Development of Vietnam (Agribank) have already pushed deposit interest rates with terms of more than 12 months by another 0.1-0.2 percent a year; Meanwhile, commercial joint stock banks increased their deposit interest rates of the same terms by 0.1-0.3 percent a year.
Many experts said that banks’ raising deposit interest rates is not only attracting more capital but also competing with other investment channels such as gold, securities, real estate and also preventing capital from going from this bank to that bank.
“Some small banks are short of capital, hence, they have to increase deposit interest rates,” said Nguyen Thanh Toai, vice general director of Asian Commercial Bank (ACB) while adding that many banks are accepting high deposit interest rates and losses in order to ensure their liquidity capacity.
Nevertheless, the capital shortage falls into small banks only, which are incapable to access the central bank through discounting bills of exchange or accessing open market operations. As for other banks, although not lacking liquidity, they still increase deposit interest rates in order to be equivalent to the general market interest rates.
Some economists said that boosting interest rates would make costs increase. At the current situation, banks should not race to hike interest rates because inflation is still controllable. Deposit interest rates are real positive.
Cao Sy Kiem, member of National Monetary Consultancy Council, said that that the central bank decided to keep the basic interest rate unchanged at 7 percent would more or less impact activities of banks, particularly raising deposits.
Although racing to raise deposits, commercial joint stock banks restrict loans.
Meanwhile, demand for capital is on uptrend, particularly when the real estate market is warmer and the stock market is having high liquidity. Many investors want to mortgage their assets for loans but many banks decline to offer loans.
According to some banks, they increase deposit interest rates in order to attract cheap capital while waiting for big demand for loans in late months. Some banks also raise deposit interest rates in a bid to boost total assets.
The reason why banks are indifferent to offer loans is when deposit interest rates have nearly hit the regulated ceiling lending level of 10.5 percent, banks switch to other investment channels to ensure profits and also avoid risks.
The central bank reported that over the last time the central bank has taken various measures to stabilise the forex market. Thus, from the end of July, commercial banks have bought foreign currencies from clients and they have gradually balanced demand and supply of foreign currencies.
Supply of foreign currencies has been significantly improved because foreign indirect investment into Vietnam is rising. What is notable is that the credit growth has already reached 28 percent, a relatively high level, which may put high pressure on inflation in late months.