Banks raise dollar saving rates to attract remittance inflow in Tet

Banks’ depositing interest rate are moving up on the fact that lenders are trying to attract strong remittance inflows that come in ahead of Tet, the Lunar New Year festival, general secretary Duong Thu Huong of the Vietnam Bank Association (VNBA) said in an interview with SGGP Dau Tu Tai Chinh magazine (Investment and Finance).

Dau Tu Tai Chinh: What do you think about many experts’ concern that lenders rush to mobilize dollars as they need more Vietnam dong capitals desperately?

Duong Thu Huong: Some banks rush to raise dollar saving rates in an effort to mobilize overseas remittance, which is often getting very strong at the end of every year.

However, this move will lead the remainders in the bank system to follow in an effort to keep their clients.

They also said lenders are trying to mobilize more dollars in order to meet the increasing demand of companies which import a large volume of goods in preparation for the country’s biggest holiday.

It may also come from the fact that high lending rate of the Vietnam dong forced borrowers to switch to the greenback.

But with the deposit rate of 5-6 percent per annum, lending rate of 7-8 percent and the forex fluctuation, borrowing the dollar seems not a good move.

What has the VNBA done to deal with the increase in the US dollar depositing rate?

We recommended lenders in a meeting to think twice before raising the rate, avoiding devaluing the dong. We are now keeping close eyes on the dollar depositing rate to make regular reports to the central bank.

I think the state bank should step in to curb the increase, which is encouraging people to halt depositing the dong and buy dollars to send into banks.

With the demand remaining low, the surging supply will hurt the foreign exchange rate.

Does the lending requirement regulated in the Circular 13 make commercial banks struggle to cut the interest rate?

Actually the interest rate was pretty steady in last September and October, staying at the depositing interest rate of 11 percent per year. Some lenders even offered loans at the rate of 11.5 percent only.

However, with the inflation keeping moving up, interest rates were almost left floating freely. Therefore, it was hardly to lower the increasing interest rate at once as lenders were in a race of raising their rates to attract more clients.

The central bank has made a great effort of cutting the depositing rate to 14 percent per annum. According to our survey, banks are implementing the Circular 13 properly, loaning less than 80 percent of their capital and reserving the remainders to maintain their liquidity.

Thus, the circular is not the main reason making lenders struggle to cut the interest rate.

The move of the dong interest rate depends on the inflation rate. The government set the credit growth rate of this year at 23 percent, which indicates the target of tightening the monetary policy. Therefore, the increasing interest rate is inevitable.

By Diu Ngan – Translated by Vu Minh

Other news