Interest rates for gold deposits suddenly soared, ranging from a low of 0.5 percent to a high of 1 percent in response to a dramatic rise in the global gold market last week.
The trend of increasing gold deposit interest rates was initiated by large banks but is now picking up in smaller banks.
The highest increase, 1.1 percent per year, in three-month gold deposit interest rates came from the Asia Commercial Bank (ACB).
Phuong Nam Joint Stock Commercial Bank raised their interest rates to 1 percent, from a stable 0.55 percent, based on a different set of terms; Sacombank has doubled its three-month gold deposits interest rates to 1 percent; and Dai A Joint Stock Commercial Bank hiked up their interest rate to at least 0.15 – 0.6 percent.
An official at a small commercial bank revealed that his company needed to increase gold deposit interest rates in order to stave off competition from other banks.
Deputy Director of ACB Do Minh Toan said that many customers believed that the price of gold was too high and expected gold prices to drop soon. As a result, they borrowed gold with a low lending interest rate. To avoid risks, some customers paid premiums to buy insurance for gold borrowing.
General Secretary of the Vietnam Banks Association Duong Thu Huong said that increasing interest rates may be a mechanism for banks to comply with the State Bank of Vietnam's new guidelines requiring banks to raise their capital adequacy ratio from 8 to 9 percent.
Senior consultant of the World Gold Council Huynh Trung Khanh said that commercial banks and investors should be cautious as gold prices will continue to increase due to high global demand for gold.
Experts said gold was in short supply because businesses collected gold in their domestic markets for export. According to the General Statistics Office, Vietnam exported US$1.34 billion worth of gold, equivalent to about 36 tons.
In August alone, Viet Nam exported $768 million in gemstones and precious metals, most of which was gold. However, gold imports were scarce in comparison leading to a gold supply shortage in the domestic market.
