Vietnam: Local currency rates pushed to limit

by **ADMIN** Mon Aug 01, 2011 7:46 am

VietFinanceNews.com - Dong interest rates face mounting pressures amid consumer price index surges. The average lending rate in the interbank market rose remarkably to 16 per cent, per year for six-month loans against the previous level of 14 per cent, per month over the week. The rates for three to six-month loans ranged from 13.72 to around 16 per cent, per year.

“We are unhappy to tag the interest rates at high levels. However, it is almost impossible to bring down the deposit rates in the face of augmenting inflationary pressures and especially escalating gold prices,” said the deputy general director of a joint stock bank.

The ‘negotiable’ deposit rate practice reportedly came back though it was said to be almost erased nearly a month ago. Some small joint stock banks now offer 18-19 per cent deposit rates per year for big customers deposited at least VND500 million ($24,000) at banks.

“The interest rates will fall once the inflation slides,” said Tran Du Lich, a National Financial-Monetary Policy Advisory Council member.

Lich said it was likely that the consumer price index will be better managed in the remaining months of 2011, paving the way for the dong deposit rates to fall.

Industry experts assumed to reign in inflation it was crucial to maintain growth at a rational pace as regulated in Resolution 11. Not less important were further tightening monetary policies to ensure banking system’s security and pull down lending rates.

In fact, the banking system’s lending amount just hiked over 7 per cent as of late June 2011 on the back of high deposit rates and credit tightening policies.

The State Bank, however, assumed low lending would help bring down bank deposit rates in late 2011 because banks will have to relax deposit rates to unblock credit flows.

According to Ho Chi Minh City Statistical Office, the city reported an estimated VND860 trillion ($4.15 billion) in deposit amount in late July 2011, up 2.4 per cent against June, 27.2 per cent more year-on-year and surging 6.7 per cent compared to early 2011.

Deposits at city-based commercial joint stock banks accounted for 61.1 per cent in total mobilised amount, up 30.1 per cent on-year. Dollar deposits made up 24.3 per cent, jumping 19.9 per cent and dong deposits represented 75.7 per cent, soaring 29.7 per cent, on-year.

http://www.vietfinancenews.com/2011/07/local-currency-rates-pushed-to-limit.html