Vietnam Banks Predicted to Cut Interest Rates from Next Q2

 

Commercial banks in Vietnam are predicted to reduce interest rates for dong loans from the second quarter of next year, given lower corporate demand for capital and partly-curbed inflation.

 

The current high lending interest rates will be kept unchanged till the end of Q1 and start falling from Q2, Le Xuan Nghia, vice chairman of the National Committee for Financial Supervision, was quoted as saying.

 

Nghia urged the government to request banks to cut interest rates for deposits in foreign currencies, mostly U.S. dollar, and hike dollar loan rates to ease off demand for the greenback, saying this could help lower dong interest rates.

 

The senior economist attributed recent dong interest rate spikes to the strong dollar exchange fluctuations and high interest rates for dollar deposits at local banks.

Nghia noted that the interest rate problem would cease if once inflation was lowered.

 

The maximum interest rate offered on dong deposits has fallen to 14% from a record high of 17.5% recently, but interest on dollar deposits remains high at above 5%.

Some banks pay even higher — Orient Commercial JS Bank (OCB) offers retail depositors 5.1% per annum for dollar deposits with term ranging from seven to 13 months while ABBank pays 5.6% for 60 months.

 

Even large banks face the risk of losing customers if they cut the rate: Eximbank Vietnam, for instance, pays 5.2% for three-month terms.

 

With businesses usually paying off debts to foreign and local partners during the year end, there is a high demand for foreign currency loans now. Many businesses also require dollars for importing items for the long holiday season between Christmas and the Lunar New Year.

 

Businesses still accepted dollar loans despite the volatility in foreign exchange to enjoy the much lower interest rates compared to the dong. (Investment Bridge)