Hang could enjoy higher rates if she made three month or one year term deposits. Hang prefers making short term deposits, because she thinks that interest rates may go up in the time to come.

Currently, one month term deposits have relatively high interest rates of 11 percent and higher. Vietcombank, Asia Commercial Bank and Sacombank offer rates of 11 percent, Techcombank 11.1 percent, VIB Bank 11.15 percent, and Eximbank 11.25 percent.

Bankers note that, as the deposit interest rate is on the rise, depositors like making short term deposits so that they can deposit again later with higher interest rates.

The general director of a joint-stock bank in Hanoi observed that, since late 2009, most bank capital has been from short term (less than three month) deposits. The Bank for Investment and Development of Vietnam (BIDV) and Vietinbank confirmed that public capital is mostly deposits of six months and under, of which 1-3 month term deposits account for the highest proportion.

A BIDV executive commented that the bank mostly mobilizes very short term capital, and yet it must provide loans for 3-6 months and longer for production and business plans. With capital costs high, it is difficult for banks to slash lending interest rates.

According to a Vietinbank executive, the fact that people prefer short term deposits reflects their high hopes for higher interest rates. If the market stabilizes, depositors will turn back to long term deposits.

When asked why banks do not push up interest rates on long term deposits to make them more attractive, the Vietinbank official explained that the interest rates of long term deposits has nearly hit the ceiling of 11.5 percent and still dies not attract long term capital.

To make long term deposits more attractive, a lot of banks have offered many attractive products like floating interest rates for long term deposits (the interest rates of deposits will be adjusted in accordance with the market interest rates).

With this option, bankers have been able to mobilize longer term deposits. Bui Thi Mai, General Director of Habubank, also remarked that people have begun making longer term deposits after they heard that the State Bank will force interest rates down.

Source: VnExpress