Local commercial banks should improve their credit quality to mitigate risks as they are raising interest rates to mobilize capital, said Tran Ngoc Minh, the Ho Chi Minh City branch director of the State Bank of Vietnam (SBV).
Minh said that a series of banks started to hike interest rates under the pressure of rising inflation, price fluctuations, and high demand for personal and business capital, which would inevitably lead to unfair rate competition, increased mobilization fees and violations of banking association regulations.
According to some experts, Vietnam is preparing for a new investment cycle in 2006-2010 period, in which many companies will be thirsty for loans. Credit institutions are, therefore, boosting up mobilizing capital to meet the demand.
Moreover, banks now need more capital for their reform and expansion in order to compete with international rivals as the country is about to join the World Trade Organization.
Over last two weeks, many banks decided to raise their interest rates, such as BIDV, Eximbank, VIBank, VPBank, Military Bank and SeaBank, while Techcombank has also just announced it will follow suit.
Interest rates for Vietnamese dong deposits are standing at 7.8-8.1 per cent per year for three-month term, 7.8-8.4 per cent for six months, 8.4-8.7 per cent for 20 months and 8.5-9.3 per cent for two years. Annual rates for medium and long-term deposits are between 12 per cent and 14.3 per cent per year. All these rates are above the ceiling level of 7.8 per cent per annum set by the SBV.
Meanwhile, rates for US dollar deposits are also on high, at 3-3.1 per cent three months, 3.2-3.3 per cent for six months, 3.4-3.6 per cent for nine months and 3.5-5.8 per cent for 20 months. Short-term rates are 5.3-5.8 per cent per annum and 6.3-6.7 per cent for medium and long-term deposits.
In the last six months, commercial banks raised deposit rates by additional 0.03 per cent per month for a twelve-month term, 0.6 per cent for six months and 0.4 per cent for three months.
Minh said that rates would continue going up because of soaring capital demand from now to the year-end.
The SBV official urged commercial banks to outline detailed plans, take initiatives to attract capital, and balance their proportions of mobilised and lending capital.
Banks must not create unrealistic expectations for high interest rates, he said, adding that they should strengthen inter-bank activities to avoid undue risks and ensure capital is used effectively.
VNS, VET
Vietnamese
