Deposit interest rates expected to go down in the coming months

Commercial banks are still paying high rates at 11.5 percent per annum for dong deposits, but bankers said interest rates will go down in several months.

Viet A Bank, which once raised the deposit interest rate to a very high level, at 11.8 percent per annum, has lowered the interest rate after the State Bank of Vietnam threatened to inspect banks peddling overly high interest rates. The bank is now offering an interest rate of 11.5 percent for many kinds of deposits, a level Viet A and many other banks have committed to implementing.

Vietinbank is now offering the same interest rate of 11.5 percent for 1-36 month deposits.

With the exception of some commercial banks still offering high deposit interest rates of 11.5 percent, many banks are quoting deposit interest rates at levels lower than 11.5 percent, including Dai Tin, An Binh Bank, VP Bank and ACB.

The director of a joint stock bank in the north said that recently, many banks have tried to borrow capital on the interbank market. However, the State Bank then requested these banks reduce the volume of capital they had borrowed from the interbank market. Therefore, these banks had to offer high deposit interest rates in order to attract more capital to offset borrowings on the interbank market

However, the director said the State Bank has announced it will give support to these banks, which means there is high hope that the deposit interest rate will go down in several months.

Nguyen Hung, General Director of VP Bank, said that two months ago, depositors and banks regularly negotiated about deposit interest rates. In many cases, as banks seriously lacked capital, they had to pay the interest rates demanded by big depositors. However, this trend has largely disappeared.

Moreover, interest rates on the interbank market have been decreasing, making it easier to borrow capital through the open market operation (OMO). Therefore, according to Hung, there is reason to believe deposit interest rates will decrease in the near future.

The government bond interest rate has been lowered to 10-10.5 percent, serving as the benchmark for the rest of the market. Some commercial banks joined the latest Government bond bidding June 17. The Treasury only put forth a bid of 1000 billion dong worth of three-year bonds and 1000 billion dong worth of five year bonds, while commercial banks registered to buy 6720 billion dong worth of three-year bonds and 3600 billion dong worth of five year bonds. All the Government bonds put forth for bidding June 17 were sold at an interest rate of 10.6 percent for three-year bonds and 10.95 percent for five-year bonds.

This, according to experts, showed that banks’ capital is now profuse and they have money to purchase bonds. Therefore, experts say, there is reason to believe deposit interest rates will go down in the time to come.

Source: saigonmoney.com