Some banks in Vietnam enter new rate race

VPBank announced it has offered a rate of 9.2 per cent per year for five-year certificates of deposit. VietA Bank has also listed a high rate of 8.2 per cent per year for certificates of deposit with tenure of just six to 18 months.

The rate at Sacombank is also at 8.2 per cent per year; however, it is applicable for certificates of deposit with tenure of 5-7 years.

The rate is much higher than the average deposit interest rates offered by other commercial banks. Currently, State-owned commercial banks offer a rate of 6.5-6.8 per cent per year for long-term deposits, while it is 7-7.5 per cent at large-sized joint stock commercial banks and 8-8.2 per cent at small-sized banks.

Analysts attribute the hike to factors such as the need for medium- and long-term funds to grow lending this year.

Many experts anticipated the scenario and warned there would be rising demand for long- and medium-term funding after they saw the economy clearly recovering and the Government signing a series of bilateral and multilateral trade agreements, which is likely to increase businesses’ demand for funds.

Another reason is that 80-90 per cent of deposits currently are short-term while demand for long- and medium-term loans is growing rapidly.

State Bank of Viet Nam (SBV)’s HCM City branch reported that last year the ratio between short-term and long- and medium-term loans was 44:56 per cent. It is normally 50:50.

In addition, SBV’s amendments to Circular 36/2014/TT-NHNN reducing the ratio of short-term deposits that can be used for medium- and long-term loans from the current 60 per cent to 40 per cent has caused deposit interest rates to rise.

Besides this, the risk weight for loans to the real estate sector has also been raised to 250 per cent from 150 per cent since 2017.

As a result, banks have been forced to hike interest rates on long-term deposits so that they have enough funds to provide long- and medium-term loans.

Expert Bui Quang Tin said the interest rate hike would put pressure on the central bank’s monetary management this year, especially when the central bank has to meet the three targets of controlling inflation, keeping foreign exchange rate and interest rate stable.

Tin was also concerned it would be hard for lending interest rate, especially medium and long term, to be steady in the wake of the deposit rate hike. Both lending and deposit rate would rise by roughly 0.5-1.5 per cent per year this year, he forecast.