According to the Vietnam Banking Association (VNBA), from October 15 to November 15, the interest rates offered by joint stock banks saw slight increases over the previous months, while the rates applied by state-owned banks remained unchanged.

VNBA said that the deposit rates applied by several local branches of commercial banks were still higher than the ceiling rates agreed upon by VNBA’s members. VNBA said that local branches of the State Bank of Vietnam had to gather commercial banks to discuss the measures to implement the interest rate policies agreed upon by VNBA’s members before and to settle the interest rate race among banks.

According to Nguyen Thanh Toai, Deputy Director General of ACB, there are two reasons that have forced banks to raise their interest rates. First, newly set up banks always have to offer high interest rates in order to attract clients. Second, some banks have a greater demand for capital than other banks. In recent months, Sacombank always offers the highest interest rates among VNBA’s members (0.82%/month for 12-month term deposit).

VNBA has urged its members to apply the ceiling interest rates agreed to before by the members, which aims to help curb inflation and stop unhealthy competition among banks.

VNBA has also asked non-VNBA institutions which have the function of mobilising capital from the public (Post Savings and some joint stock banks and joint venture banks) to join hands in this work.

However, commercial banks said that in the time to come, if the inflation rate kept increasing, banks would have to raise deposit interest rates in order to ensure real profit for clients.

In the last ten months, the CPI has increased by 8.12% compared to December 2006 and 9.34% over the same period of the previous year.

Experts have attributed the high inflation rate to high credit growth rate. According to the State Bank of Vietnam, the credit growth rate was 35% in the first 9 months of 2007, nearly double the average rate in the first 9 months of 2006. Joint stock banks saw the highest credit growth rate, by 103% over September 2006 and 65% over the end of 2006.

The interest rates offered by commercial banks in November 2007