Commercial lenders lowered their interest rate on the dong deposits to 15 percent on Dec. 13 in accordance with their pleading at the meeting with the central bank earlier.
Techcombank was among the first lenders reducing the deposit rate, offering the rate of 13.45-13.95 percent per annum.
The Hanoi-based lender, which is the fifth-largest bank in term of assets, triggered an interest rate race last week when announcing it would offer dong depositor rates as high as 17 percent per year.
Other lenders reacted by pushing their own rates up, some as high as 18 percent.
But these offers were rescinded after the central bank requested them to bring the rates down to prevalent market levels – 14 percent or less.
Asia Commercial Bank, known as ACB, also cut its highest deposit rate to 15 percent per year from 15.2 percent, which was earlier the special offering under its promotional pack titled “Making New Year fortunes”.
The government-run banks made a similar move, with Vietcombank lowering its deposit rate to 14 percent and BIDV cutting its rate to 13.5 percent.
Financial experts said the rate of 15 percent is adequate as lending demand at yearend is increasing sharply. However, they noticed that the current deposit rate would force lenders to raise their lending rates to 17-18 percent per year at least.
Vo Quoc Thang, chairman of the Vietnam Young Entrepreneurs Association, said with the lending rate of 17-18 percent per year, local businesses would struggle to cope with the increasing cost of raw materials and the harsh competition from imported products.
Many firms will be willing to make no profit this year to maintain their business, but this plan will be undone if the high lending rates last long, Thang said.
Many financial experts expected the interest rate would decline further on February as lending demand of local businesses cooled off.
They also said high interest rates will help lenders to separate borrowers. Lenders will offer regular and big clients loans with preferential rates. ACB offered an annual lending rate of 15.5 percent only to businesses.
Some small commercial banks, however, shunned the central bank’s request, keeping the interest rate on dong deposits at more than 15 percent. They said they offered the high rates for big deposits only.
These banks will negotiate the interest rate with clients in a face-to-face meeting only in attempt to avoid the central bank’s penalty.
A deputy general director of a commercial bank, who asked not to be named, disclosed many clients tended to deposit their money in the banks offering the highest rate. “Efforts to keep client from switching their money to other banks have seen many lenders offering the rate of more than 15 percent through negotiating,” he said.
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