VIETNAM - Banks try every way they can to attract dong

by lexie Sun Jan 08, 2012 2:15 pm

January 8, 2012

Banks try every way they can to attract dong

In order to offset the dong capital which has become short when businesses withdraw cash in masses these days to pay debts, pay bonuses and wages to workers, banks have been trying every way they can to attract dong.

Paying high for deposits

Offering high interest rates for deposits proves to be the most effective method to attract capital. However, since the dong deposit interest rate is capped at 14 percent per annum, banks have to increase the interest rates for gold deposits.

This explains why in the last three months, the gold deposit interest rates have made a lot of new records. The interest rates jumped from less than one percent per annum in September 2011 to 2 percent in mid October for one month term deposit. Meanwhile, Saigon Bank is now offering the interest rate at 3.5 percent per annum.

Not only gold, the interest rates of non-dollar deposits have also increased greatly. The interest rates applied to euro, Australian dollar, Canadian dollar have been as high as four percent per annum.

Experts believe that banks mobilize capital in gold, then use the gold as the mortgaged assets to borrow dong on the interbank market to improve their liquidity. Banks have also been using the non-dollar foreign currencies they mobilize to convert into dong to serve the lending.

Though the State Bank of Vietnam has threatened to heavily punish the commercial banks which offer more than 14 percent for dong deposits, Thoi bao Kinh te Saigon has quoted its sources as saying that some banks are offering more than 14 percent for the 1-month deposits worth more than 500 million dong.

Vu Thanh Tu Anh, Research Director of Fulbright Economics Teaching Program, said that the problem of the banking sector now is that too many administrative instructions have been used, which has distorted the market. The ceiling interest rate mechanism is one of the policies. Governor of the State Bank of Vietnam Nguyen Van Binh himself has affirmed that the central bank will remove the ceiling interest rate mechanism.

Rushing to launch sale promotion campaigns

“If you deposit money at banks these days, you will get gifts, no matter what banks you deposit at,” a credit officer at a big bank in district 5 in HCM City said.

“Nowadays, if you don’t run any sale promotion campaign, you will never be able to attract deposits from clients,” he affirmed.

At Saigon Bank, the new bank which has formed up from the merger of three banks, a sale promotion program is being run with the total value of prizes up to 32 billion dong. This seems to be the biggest promotion program these days, which is applied to the deposits worth of five million dong and higher, lasts from January 3 to March 31.

After finishing a promotion program, Viet A Bank has kicked off another promotion program, lasting from January 9 to March 24, which has the total prizes worth up to 12 billion dong.

A representative of Viet A said that thanks to the promotion programs, the volume of cash withdrawn from the bank did not increase too sharply, which allows the bank to set up its business plan.

Vo Tien Dat, Director of the district 1’s branch of VIB Bank, said that his bank is also running a promotion program, under which the award for the first prize is one kilo of SJC gold, worth 1.1 billion dong.

The program, according to Dat, aims to attract more dong to the bank, and encourage depositors not to withdraw money from the bank. Dat said that the amount of dong withdrawn from the bank recently has increased by 15-20 percent, since businesses need money to pay wages and bonuses to staff, and make payment.

http://www.vietfinancenews.com/2012/01/banks-try-every-way-they-can-to-attract.html#more