Many banks have increased interest rates of mobilised capital while they still have lendable capital. The situation can lead to unhealthy competitions among banks and negatively impact on the national economy.

The State Bank of Vietnam (SBV) has asked commercial banks to have careful consideration before increasing interest rates to avoid unwanted risks. Radio the Voice of Vietnam (VOV) reporter interviewed SBV Governor Le Duc Thuy on the issue.

Reporter: What is SBV supposed to do when the decision of many commercial banks to increase interest rates is not in line with the market supply and demand?

Mr Thuy: I have worked with several commercial banks, especially those in HCM City. One of the reasons for them to increase is due to a surge in the interest rates of US dollars. In addition, banks are increasingly investing in valuable papers to mobilise investment capital for the national economy. According to market principles, SBV will not intervene in capital mobilising and lending operations of credit organisations. “However, I warn that banks should not use interest rates as a competitive tool. If they increased interest rates of mobilised capital, they should reduce costs for their activities to keep the interest rates of loans lower than those of mobilised capital”, he said. So far, there have not been any bad impacts on enterprises and the national economy. However, banks cannot foresee the risks to take necessary measures and use capital effectively.

Reporter: In your opinion, is there any new level of interest rates for both mobilised capital and loans?

Mr Thuy: I think the level of interest rate is just one way of speaking. In fact, there have been levels of interest rate in recent times, not only this year. For example, the interest rates of moblised capital in the first half of this year increased to a highest rate of 6 percent/year and this could be seen as a new level of interest rate.

Reporter: What do you think about the impact of interest rates on the national economy, including inflation?

Mr Thuy: The National Assembly has put this year’s inflation rate under the country’s GDP growth rate. This means that if GDP growth rate is eight percent, inflation rate of less than 8 percent will be acceptable. SBV has estimated that if there is no abnormal fluctuation, this year’s inflation rate will be between 7-7.5 percent.

Reporter: An increase in FED interest rates is just an opportunity for banks to drive up their interest rates. If commercial banks continue to increase interest rates in competition with one another, what is SBV’s move launch to prevent the situation?

Mr Thuy: SBV has warned credit organisations of possible risks while co-ordinating with banking associations and potential creditors to provide banks with reasonable deals. SBV does not intervene directly in banks’ business activities but only recommends that banks should not use interest rates as a competitive tool.