Banks see deposits shrink after borrowing rate cut
By Thuy Trieu - The Saigon Times Daily
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| Higher dollar rates are also a reason behind difficulties encountered by banks in attracting funds in Vietnam dong - Photo: Le Toan |
HCMC – Several banks have lamented a fall in mobilization of Vietnam dong after cutting their borrowing rates to around or under the annual level of 11.2% as committed with the Vietnam Banks Association.
Dam The Thai, head of the individual customers division of An Binh Bank, said mobilized funds at his bank has come to a halt after lowering the deposit rate. Similarly, an executive at Vietnam Export- Import Bank (Vietnam Eximbank) said the bank has seen contraction in mobilization.
Viet A Commercial Bank early this month cut deposit rates to 10.8% or less a year, only to see its mobilization shrink substantially. The bank last Thursday sought to reverse the trend by raising the rate to 11.2%, on a par with that in other banks to ensure sufficient funds.
Some bankers blamed the fall in mobilization on poor supervision by the Vietnam Banks Association as well as the central bank, saying some other lenders have not adhered to the commitment by maintaining a high deposit rate.
The Vietnam Eximbank executive complained that some other banks have drained savings from his bank by offering a deposit rate as high as 12.5% a year. “We’ve been informed of a client withdrawing money from Vietnam Eximbank for depositing at another joint stock bank that offers a rate as high as 12.5% a year,” he said.
The executive suggested that the central bank tighten its supervision so as to create a level-playing field for all lenders. Currently, the central banks have warned banks not to offer bonuses or high-valued gifts which in reality increase the borrowing rate.
However, it is not easy to pinpoint the violator, as all such out-of-law acts are not made public. A depositor told the Daily he is having savings accounts at several banks and enjoying an annual rate higher than the regulatory rate of 11.2% a year.
The falling deposit rate for Vietnam dong is also attributed to the rising dollar rate.
The highest deposit rate for the US dollar has now amounted to 5.3% a year for the 12-month term, while at An Binh Bank, the rate has even shot up to 5.6% a year for five-year deposits.
A banker disagreed with the central bank’s interference to force down the interest rate for Vietnam dong. The source told the Daily that in the short term, this lower deposit rate will help enterprises to enjoy lower lending rates, but in the long term, this will distort the market as the administrative measure does not reflect the market movements.