The chief of the Vietcombank Capital Office Hoang Hong Hanh on June 7 said he was shocked when she heard that the Bank for Investment and Development of Vietnam (Bidv) has officially started to issue certificate of deposits for 13-month dong terms with an interest rate of up to 8.28% a year (nearly 0.7% per month). This has unsettled other banks.
Before the announcement to issue the certificate of 13 month dong deposits with high deposit interest rate as other joint stock commercial banks from June 9 by the Bidv, all state-run commercial banks had stated they were not about to raise interest rates even though for the consumer price index has climbed to a six-year high of 6.3% in the first five months of this year.
At the fifth session of the 11th National Assembly, Le Duc Thuy governor of the State Bank of Vietnam (SBV) reiterated that the SBV considered the inflation rate was under control, at an acceptable level and dong deposit interest rates would not be increased.
State-run commercial banks all said that at present, no specific instruction for them to increase the dong deposit interest rates even though they all admit that the dong deposited at banks is signalling a slowdown respectively because the CPI is continuing to climb.
Even, Nguyen Duc Vinh general director of the Technical and Commercial Joint Stock Bank or Techcombank said, “we have not yet made any movement on increasing deposit interest rates because this might have impact on the stabilisation of the market prices”.
“By the end of May, the SBV announced the basic deposit interest rate of 0.625% per month. The deposit interest rate now is regarded as a spring that is being heavily pressed”, said a banker.
At present, the 12 month deposit interest rates of commercial banks are fluctuating around from 7.2–8.4% a year while the CPI for the first five months of this year has jumped up to 6.3%.
A specialist of a state-run commercial bank assessed that even though the announcement that inflation is under control and dong deposits are still more advantageous than other strong foreign currencies, few banks believe the rationale behind the official stance. Moreover, dong depositors do not understand whether long-term deposits in dong are more advantageous or not, but they certainly realise short-term dong deposits do not bring any advantage.
The banker also said that state-run commercial banks had to try to maintain dong deposit rates as regulated in the interbank market but it is unlikely they will be able to do so for long if the CPI continues to increase strongly.
A source from Vietcombank said that the dong capital mobilisation by this bank has slowed and the move by Bidv and the events of the issuance of six month bills by the Industrial and Commercial Bank of Vietnam (Incombank) and the issuance of 364 day bills by the Bank for Agriculture and Rural Development (Agribank) is threatening to draw depositors away from Vietcombank.
“The bank now only accounts for 7% of the dong deposit market, and its branches less than that amount, and our deposit interest rates in dong is still lower than other state-run commercial banks. If the bank does not increase deposit interest rates, our clients will move elsewhere to put their funds at other banks”, said an Vietcombank official.