Deposit interest rate tends to rise in longer terms. With the support of the Government’s anti-fiscal crisis 4 per cent lending interest rate subsidy programme, loan interest rates have become even lower than the rates paid for deposits. This has caused outstanding loans to soar.
Over the past one month, the deposit interest rate has touched 9 per cent threshold. The peak of 9.3 per cent per annum for 36-month term was recorded at Saigon-Hanoi Commercial Joint Stock Bank (SHB) on April 29. Not only small-scaled banks but giant lenders like the Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), the Bank for Investment and Development of Vietnam (BIDV), and the Vietnam Bank for Industry and Trade (VietinBank) also join the interest rate race.
VietinBank has issued deposit certificates, offering interest rates as high as 9 per cent per annum for 36-month term deposits, the highest interest rate now available on the market.
Higher rates, more promotions
The interest support programme of the Government for medium- and long-term loans plus loosened monetary policies and lending boosting policies forced banks to mobilise capital to meet the demand. The hike is usually applied to deposits with terms of over 12 months while shorter terms remain almost unchanged at 8 per cent per annum, more or less. Several lenders give 8.4 per cent - 8.5 per cent per annum. Banks say that they have to raise long-term deposit interest rates because they need to well prepare for the disbursement under the second demand stimulus programme which aims to support businesses’ investment plans.
Together with interest rate increase programmes, banks have also resumed offering impressive promotion programmes after a quiet period. The promotion programmes are believed will help lure more clients in the context that banks cannot push deposit interest rates up any further.
Maritime Stock Bank has also launched a promotion programme, offering nearly VND1 billion worth of prizes, applied to those who open fixed-term deposits. The interest rate under the programme has been pushed up to 9.3 per cent per annum for 48-month term deposits, 9.2 per cent for 36-month and 8.15 per cent per annum for 12-month.
An Binh Commercial Joint Stock Bank (ABBank) hopes that it can lure depositors with the savings product series ‘accumulating for the future’. Clients who join the programme can enjoy high interest rates, get life insurance policies, and do not lose money if they withdraw capital before the deposits mature. With this product, clients can add to their account periodically in 2-10 year terms. The minimum periodical increment is VND300,000 or US$20. Depositors will be given 100 per cent of life insurance premiums with the insured sum of money of up to VND2.4 billion.
Saigon-Hanoi Bank (SHB) has announced the ‘super attractive savings programme 3+’ which has been applied from April 2 to June 2. The programme offers very attractive interest rates of up to 9.3 per cent per annum for 36-month term deposits, while people have opportunities to get the bonus interest rate of 0.25 per cent per annum.
Big lenders like Vietcombank, BIDV and VietinBank which usually apply lower interest rates than smaller credit institutions also follow the suit. VietinBank has issued deposit certificates for two months from April 14 to June 15, offering interest rate at 9 per cent per annum for 36-month term.
The interest rate increases prove to be unavoidable as the mobilised capital volume increased slowly, as deposit interest rates were low to attract depositors.
According to the current rule, the highest interest for short-term and long-term VND lending is 10.5 per cent per annum. With 4 per cent offset by the Government, the rate is only 6.5 per cent per annum at most. The level is even much lower if borrowers enjoy other supports like export credit.
This concerns many because many borrowers might not invest their loans in their projects but put back to banks to enjoy interest rate plus. On April 22, the State Bank of Vietnam (SBV) requested credit institutions to tighten control over their lending to minimise lending risks in applying interest supporting programme.
Sudden credit growth
In April and May, the Vietnamese stock market has significantly recovered following positive economic signals. Investors pumped more cash into the equity market, which is now the most attractive investment channel. Putting money into banks is no longer the top choice. Thus, mobilised capital at banks dropped sharply. This also forced banks to raise interest rates to attract depositors.
According to the April 2009 report by the State Bank of Vietnam (SBV), the credit to the economy by April 2009 increased by 4.86 per cent in comparison with the previous month, and rose by 11.16 per cent as compared to end 2008, of which VND and foreign currency investment was up by 5.81 per cent and 0.65 per cent respectively. The growth of 11.16 per cent was lower than 14.73 per cent in the corresponding period in 2008 but was higher than 9.97 per cent in the same period of 2007, said State Bank Governor Nguyen Van Giau
In the first three months of 2009, credit growth was very low but suddenly rose in April. The central bank said the credit growth stood at 0.52 per cent in January, 0.23 per cent in February and 1.92 per cent in March.
The high credit growth is seen to be good to the economy. According to specialists, the State Bank should keep the prime rate unchanged this month.
Minh Chau
Vietnamese
