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Interest rates decreasing, quietly   2008-07-17 - DTCK

Commercial banks are beginning to lower deposit interest rates as they cannot dodge the laws and lend at high interest rates as the central bank is keeping stricter control over loaning.


Previously, banks organised noisy media campaigns to broadcast interest rate increases, but now they are reducing interest rates in a quiet manner.


Saigon Commercial Bank has decided to slash its demand deposit interest rate from 9% per annum to 6%. The bank has abolished the high interest rate of 19.4% on 13-month term deposits applied at the end of June. The bank’s highest interest rate is now 18.8% for 370-day deposits.


Gia Dinh Bank has also quietly reduced the deposit interest rate from 19.5% (3-month deposit) to 18.9%, while the interest rate for 2-month term deposits has been reduced to 18.62% per annum. Kien Long Bank has cut the interest rate of 20% per annum on 13-month term deposits to 19% as requested by the State Bank of Vietnam in an effort to stabilise the monetary market.


US$ interest rates have also been cut. Eximbank has reduced the highest interest rate of 7% (12-month term deposit) to 6.5% per annum.


Analysts say that the US$ interest rates will see sharper cuts than VND, as the mobilised US$ capital rose sharply in the last two months of the second quarter, while the demand for US$ loans has been decreasing from businesses, leading to capital jams at banks.


Banks proved to be self-confident and determined when raising interest rates, but hesitant when lowering interest rates.


Banks have to cut interest rates in a quiet manner, because they have to seek a way to cut expenses, but they cannot do that noisily. They fear that depositors, hearing about the interest rate cuts, will leave them and make deposits at other banks.


The director of a joint stock bank in Hanoi said that the average capital mobilisation cost is nearly 19%, while it can lend at 21% at maximum, which means no profit for the bank. Therefore, he has to think of cutting deposit interest rates; however, the cuts must be carried out in a way which prevents the massive withdrawal of capital.


Ho Huu Hanh, Director of the HCM City Branch of the State Bank of Vietnam, said that if the inflation rate continues going down in July as it did in June, deposit interest rates will go down from the current levels.


The Bank for Investment and Development of Vietnam (BIDV) has announced it will cut US$ short-term lending interest rates by 2% for the importers of key products, and 1% for the importers of other items.


According to the State Bank of Vietnam, the deposit balance of banks remained at high levels last week. As the demand for capital remained very high, the State Bank continued offering to purchase valuable papers on the open market, VND5-12,000tril for each session, in order to support banks’ liquidity.


The currently applied interest rates:


VND deposit interest rates

3-month term deposit (% per annum)

6-month term deposit (% per annum)

12-month term deposit (% per annum)


Highest rate


Highest rate


Highest rate

State owned banks







Joint stock banks








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