Almost every bank has increased its interest rates though banks themselves and experts had believed that the rates must reduce. There is now an unexpected race of raising interest rates.

Under resolutions of the Vietnam Banking Association, banks have to meet every month to reach agreement on deposit interest rates keep their business stable. The current rates on some certain terms (0.65% per month for 6-month term; 0.7% for 12-month term; 0.2% for organization and 0.25% for demand deposit of individuals) have been applicable since September 15, 2005. However, banks have been constantly pushing up rates on other terms that are not committed like 7-month term, 5-month term, bonds, etc.

An official from the Banking Association said that is a “shortcut” for banks make them more competitive, keep their market share and ensure liquidity.
According to Vietcombank General Director Vu Viet Ngoan, in fact, interest rates offered by banks are high due to issuance of bonds, promissory notes, etc and this is difficult to be explained with regard current demand and supply.

Meanwhile, VP Bank General Director Le Dac Son said it is normal that banks raise interest rates now because the FED has increased US interest rate to 5% per annum, forcing domestic commercial banks to change rates on dollar and rates on dong rise as a result. Moreover, demand for capital for business activities is high in the first half of year. To supply enough, banks have to mobilize more capital and one way to do that is to raise interest rates.

Different from normal, State-owned commercial banks this time are quicker in raising rates. That is because higher rates offered by joint stock commercial banks caused people to put their money at these banks rather than State-owned banks, said Mr. Le Dac Son.

From the view of a State-owned commercial bank expert, Incombank General Director Pham Huy Hung said while deposit at banks increased by 34% so far this year, lending amount rose only 16%. On the other hand, money is abundant at banks and it is irrational to raise interest rates in such a context. This will reduce efficiency of banking activities and sufferers will finally be businesses and the economy, he further said.

Source: Lao Động