HANOI - Higher
interest rates for the Vietnamese dong will be
applied at domestic banks as of Friday, according
to an official of the State Bank of Vietnam (SBV),
Tran Ngoc Minh.
Minh, director of SBV's
branch in Ho Chi Minh City, said the six-month
rate for Vietnamese dong deposit will be increased
from the current 0.63% to a maximum 0.65%/month,
and the 12-month rate will go from 0.65 to a
maximum 0.7%/month.
Rates for non-term
deposits sent by individuals and corporations will
be 0.25% and 0.2% per month, respectively, he
said. Loan rates will also rise by 0.11-0.28% to
9.72 - 13.2%/year. Minh said
the deposit rate adjustments
were necessary for three reasons.
The
country's economy needs a great deal of capital to
reach its targeted annual growth rate of 8.5%. But
the capital mobilised by banks in the last eight
months increased by only 12.4% compared with a 19%
increase in the amount they are lending.
Increasing interest rate deposits would facilitate
local banks' capital mobilization and help them
meet this need, he said.
The consumer
price index, currently measured at 6% on the
domestic market, is another reason why domestic
banks have to increase interest rates. Because of
this, banks will attract more money from citizens,
Minh said. The third reason is the pressures of
the global market. The US Federal Reserve has
continually increased interest rates of US dollar
deposits in the last eight months. The Fed has
raised rates several times since last June,
pushing its fund rate from 1% to nearly 4%.
Current interest rates for the US dollar
hovers between 0.04 and 0.2% higher than those
recorded early this year. It will continue being
raised to 5.3 and 5.5%/year, he said. The Fed's
rate increases have had an impact on the global
economy, and Vietnam is not exempt from those
influences, he said. The Federal Reserve's rate
increases have directly affected domestic banks
and forced them to adjust their own interest
rates.
Minh added, however, that the rate
increases at domestic banks would create a new
pressure on Vietnamese enterprises which are
already coping with the high prices of petrol and
production materials. Because of the market's
fluctuations, increasing interest rates is an
unavoidable task that domestic banks have to face,
Minh said. However, he said, local banks ought to
apply measures to limit this practice.
He
suggested that banks should not participate in
unhealthy rate competitions and that they should
increase interest rates only when they are in
great need of capital and have effective capital
use plans. The central bank has also encouraged
local banks to focus on investing in small and
medium-sized projects, key projects with high
economic effects, and the small agricultural
projects that will help farming families get out
of poverty.
