forex Banks

Banks slash dollar interest rates

Banks are slashing US dollar deposit and loan interest rates to solve stagnant capital movement and encourage business and investment, said a senior State Bank official.
A new US$ deposit interest rate ground is set up, when state-owned banks and Vietcombank officially lower US$ deposit interest rates to 1.5 percent per annum at the highest. (Photo: SGGP)

Since June 1, many banks, such as the Bank for Investment and Development (BIDV), the Bank of Agriculture and Rural Development(Agribank), the Bank for Industry and Trade(Vietinbank) have reduced dollar deposit and loan interest rates by 1.5 percent and three percent per year respectively, down by 0.4 to 0.6 percent compared with previous interest rates.

Vietcombank on June 1 adjusted rates, including a cut to 1.3 percent for six-month deposits, 1.4 percent for nine-month deposits and down to 1.5 percent for 12-month deposits. The bank also applied dollar deposit interest rates by 1.5 percent for more than 12-month deposits from June 9.

The bank began applying dollar loan interest rates at three percent for short term loans and four percent for medium and long term loans.

Some commercial banks have also adjusted dollar interest rates for savings and loans.

Dong A Commercial Bank applied dollar savings interest rates at 1.5 percent for nine and twelve month deposits from June 1.

At the beginning of June, the Vietnam Bank Association called for its members to slash dollar deposit and loan interest rates by 1.5 percent and three percent respectively.

The current average interest rates for dollar accounts are 1.24-2.65 percent and dollar loans of three to five percent.

Cuts to deposit and loan interest rates were positive for the foreign exchange market, as businesses were hesitant to borrow in dollars to avoid risks in exchange rate fluctuations. It has also helped to reduce speculation of the dollar.

At a Government meeting to discuss Vietnam’s foreign exchange market, the ministries of Finance, and Planning and Investment agreed that world economy shows sign of recovery.

Export and import demands have increased, but direct foreign investment is forecast to fall, causing problems for the domestic balance of payments.

The general secretary of the Vietnam Bank Association, Duong Thu Huong, said commercial banks should agree to slash foreign currency deposit and loans that are suitable to supply and demand.

Some export companies have received Government-backed subsidized loans, however, they did not pay banks back in dollars, with some companies just wanting to borrow dong, instead of dollars to avoid exchange rate fluctuations.

According to Dr. Tran Huy Hoang, dean of the Bank Department of the University of Economics, Ho Chi Minh City, companies are still hesitant to borrow dollars due to high lending interest rates and currency fluctuations.

Banks should decrease lending interest rates, as well as carry out measures to stabilize rates between the dollar and dong, he added.