After taking part in a race to offer exorbitant deposit rates a fortnight ago, many banks are now lowering their deposit rates for savings of above 12 months to below 12 percent a year.
Western Bank, which became a phenomenon in mid-June for mobilising deposits at as high a rate as 14 percent a year against the average figure of the system of 11 – 13 percent, last week cut the rate to only 12.5 percent a year for savings of a 13-month term.
On June 8 the State Bank of Vietnam, through its circular no. 19, stipulated that credit institutions are allowed to set interest rates on long-term savings of above 12 months through their own initiatives.
Banks have since set a new height for deposit rates of that category to between 12 – 14 percent, while rates savings of a term between one and 12 months are restricted under a ceiling of 9 percent a year.
However, Western Bank’s rate cut has now set another trend for other banks, which have respectively lowered their deposit interest rates, after rushing to hike them following the cap removal.
SeaBank now offers savings for a term between 12 and 24 months at an interest rate of 11 percent a year, instead of the erstwhile 12 percent rate.
It also cut the 12.6 – 12.8 percent rate applicable to deposits worth more than VND1 billion (US$48,000) to 11.6 – 11.8 percent a year.
At Techcombank, the 12 percent a year rate is now only applied to 12-month savings, while the rate for 13-month term has dropped to only 11.07 percent a year.
The highest rate offered by Vietcombank is 11 percent a year, applicable for 12-month terms, while savings with terms between 24 and 36 months are now subject to a low rate of 9.5 percent.
Interbank rates soar
The interbank interest rate yesterday unexpectedly soared by 2 – 3 percentage points from last week, according to Phap Luat Thanh Pho newspaper.
Specifically, the interbank overnight rate rose from 5 percent to 7 percent a year, while rates for a one-week term increased to 7.6 – 8 percent a year, up from 5 percent.
However, experts said there should be concern over the hikes.
Nguyen Hoang Minh, deputy director of the State Bank of Vietnam’s branch in HCM City, said the soaring overnight interbank interest rate does not provide enough ground to say that banks have weak liquidity.
“A bank may face a money shortage one day, but things will be solved the following day,” he said.
“Moreover, the interbank rate is currently lower than the deposit rate, so there is nothing to worry about.
“There have been times when rates were as high as over 20 percent,” he concluded.
Meanwhile, Doctor Le Dang Doanh, former head of the Central Institute for Economic Management, said rising interbank interest rates means that some banks are facing liquidity problems, especially during the first days of the week.
“This is when there are high demands for payments but banks cannot afford them, and thus have to borrow from the interbank market,” he explained.