• Lower interest rates expected in coming days 

ANZ Vietnam has officially applied new deposit rates, with the highest being 13 percent a year. The annual rate of 12.7 percent is now applicable for deposits of over VND500 million.

A teller of this bank said the deposit rate cut is to comply with the central bank’s policy to reduce interest rates by one percentage point, adding that clients should early deposit their money as interest rates would likely drop further.

Shinhan Vietnam Bank on February 6 lowered deposit rates to an average of 12.8 percent. Deposits of 1-3 months are given the highest interest rate of 13 percent per year.

HSBC Vietnam has also announced its intention to reduce deposit rates. Meanwhile, local banks still keep deposit rates at 13 percent – 14 percent depending on terms, waiting for an official announcement from the central bank.

A teller of a large bank said those depositing more than VND1 billion could enjoy the maximum interest rate of 16 percent upon negotiation, but only a branch director has the authority to negotiate a deposit rate.

Small banks still maintain the deposit rates they have negotiated with customers. A bank in District 1, HCMC, offers an interest rate of 17 percent for deposits of over VND500 million.

Le Tham Duong, head of the Business Faculty of the HCMC Banking University, said lowering deposit rates should have been done earlier when the central bank had categorized local credit institutions.

Banks in group 1 and 2 have received capital from banks in group 3 and 4, as well as gained hefty mobilized capital from the 14 percent deposit rate ceiling applicable from September 7, 2011.

Abundant capital input, while few enterprises can borrow bank loans, enables banks to ease lending rates, leading to lower deposit rates.

Duong said lower inflation also helped bring down interest rates. 

The inflation rate in the first quarter often accounts for half of the year’s figure, but since inflation will likely pick up a mere 3 percent in the first 3 months, cutting interest rates is sensible.

As unhealthy banks have been identified, banks aren’t likely to push up interest rates either, Duong said.

But Duong said it remains doubtful whether capital flows into profitable sectors like export, agriculture and support industries, or inefficient State-owned businesses, and whether enterprises can access capital.

Nguyen Duc Thanh, director of the Vietnam Center for Economic and Policy Research (VEPR), said the deposit rate ceiling should be removed. 

As inflation is declining and more capital is flowing into banks, interest rates should be decided by the market.

If the central bank insists on imposing a ceiling for deposit rates, strong sanctions must be given as several banks are still violating the ceiling, making it difficult for small lenders.