Banks begin to cut back interest rates

Photo: Tuoi Tre

Many commercial banks Friday started to cut their deposit interest rates by 0.2 percentage points to 11 percent per year in compliance with a recent agreement.

The agreement, made between the Viet Nam Banks Association (VNBA) and the State Bank of Vietnam, asks banks to cut their interest rates to no more than 11 percent, instead of 11.2 percent.

The move is designed to urge banks to cut capital input costs and help enterprises access more credit.

Asia Commercial Bank (ACB) is the first bank to apply the new interest rate on 36 month deposits. Interest rates for one week to 24 month deposits range from 9.9 to 10.88 percent per year.

But ACB will give depositors cash as a bonus, which is equal to 0.15 percent of their primary deposit.

Earlier this week, Techcombank, DaiA Bank, HDBank also cut their deposit interests rates to below 11.2 percent.

As inflation pressures continue to grow during the final months of the year interest rate cuts would be executed with prudence with respect to the market’s behavior and the depositor’s expectations, said VNBA.

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Banks say cutting rates still a challenge

HCMC – Several bankers say it still proves difficult to cut interest rates in the rest of the year, borrowing and lending alike, as instructed by the Government although their current capital has got a spur following amendments to Circular 13.

The general director of a bank in HCMC’s District 1 said that his bank would not lower the lending rate any more between now and the end of the year as its profit up to date was so low compared to the year’s target. In addition, given current deposit rates, mobilization in Vietnam dong at the bank cannot increase much so the possibility of trimming the rate would be low, he added.

Another banker in HCMC said the rate cut would be minimal if any.

After Circular 13 was amended, which effectively means quantitative easing, the amount of current capital has increased as banks can use part of corporate deposits under call terms for lending, a practice banned under the circular.

However, “although there is the possibility of lower lending rates, the reduction will not be substantial,” explained the banker, who serves as deputy director of the HCMC branch of a big bank.

In September, Vietnam Banks Association had meetings with banks in Hanoi and HCMC to encourage them to reduce interest rates under the Government’s requirement. The association encouraged banks to cut mobilization rates to 11% from October 15 from the current 11.2% per year.

Early this month, the association has sent a document asking banks to comply with the requirement, but Duong Thu Huong, the association’s general secretary, told the Daily that banks would look at each other before making any rate cut decision due to fear of losing depositors.

“Banks are very much hesitant over the rate cut as demanded by the association,” Huong said.

In fact, commercial banks have launched a lot of promotion programs to lure depositors. Besides, according to the leader of a joint-stock bank, several lenders even negotiate deposit rates with clients at this time.

However, Huong also said that besides amending the Circular 13, the interest rates are also determined by the country’s inflation rate this year, which usually gains a faster pace towards the year’s end, as seen in the September CPI at 1.31%.

In addition, deposit rates for the U.S. dollar and gold are increasing, making it harder to cut the rate in Vietnam dong. Therefore, Vietnam Bank Association has asked banks to lower their dollar and gold rates also.

Many banks said that their deposits in gold have strongly increased after the interest rates have increased to 1%-2% per year.

According to the third quarter report of the State Bank of Vietnam, lending rates in Vietnam dong for agricultural sector, exporters, small and medium enterprises are around 12%-12.5% at State-owned banks and 12.5%-13.5% at joint-stock banks while rates for other loans are from 13% to 15% per year. However, only banks’ close corporate clients can enjoy those rates while others are charged at least one percentage point higher.

The report also said that mobilization and lending rates could not decrease to the levels asked by the Government (deposit rate at 10% and lending rate at 12%) due to high pressure on inflation and banks’ difficulties in mobilizing fund.

The new report of the National Financial Supervisory Commission said that after changes to Circular 13, the capital flow has got bigger but basically it is still restricted by the loans-to-deposit ratio at 80% for banks.

In 2009, banks’ outstanding loans accounted for 96.93% of total mobilization, and the ratio was 92.96% in the first half this year. Reducing the ratio further to 80% from October 1 has also proved a hard nut to crack for many banks.

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Banks say cutting rates still a challenge

HCMC – Several bankers say it still proves difficult to cut interest rates in the rest of the year, borrowing and lending alike, as instructed by the Government although their current capital has got a spur following amendments to Circular 13.

The general director of a bank in HCMC’s District 1 said that his bank would not lower the lending rate any more between now and the end of the year as its profit up to date was so low compared to the year’s target. In addition, given current deposit rates, mobilization in Vietnam dong at the bank cannot increase much so the possibility of trimming the rate would be low, he added.

Another banker in HCMC said the rate cut would be minimal if any.

After Circular 13 was amended, which effectively means quantitative easing, the amount of current capital has increased as banks can use part of corporate deposits under call terms for lending, a practice banned under the circular.

However, “although there is the possibility of lower lending rates, the reduction will not be substantial,” explained the banker, who serves as deputy director of the HCMC branch of a big bank.

In September, Vietnam Banks Association had meetings with banks in Hanoi and HCMC to encourage them to reduce interest rates under the Government’s requirement. The association encouraged banks to cut mobilization rates to 11% from October 15 from the current 11.2% per year.

Early this month, the association has sent a document asking banks to comply with the requirement, but Duong Thu Huong, the association’s general secretary, told the Daily that banks would look at each other before making any rate cut decision due to fear of losing depositors.

“Banks are very much hesitant over the rate cut as demanded by the association,” Huong said.

In fact, commercial banks have launched a lot of promotion programs to lure depositors. Besides, according to the leader of a joint-stock bank, several lenders even negotiate deposit rates with clients at this time.

However, Huong also said that besides amending the Circular 13, the interest rates are also determined by the country’s inflation rate this year, which usually gains a faster pace towards the year’s end, as seen in the September CPI at 1.31%.

In addition, deposit rates for the U.S. dollar and gold are increasing, making it harder to cut the rate in Vietnam dong. Therefore, Vietnam Bank Association has asked banks to lower their dollar and gold rates also.

Many banks said that their deposits in gold have strongly increased after the interest rates have increased to 1%-2% per year.

According to the third quarter report of the State Bank of Vietnam, lending rates in Vietnam dong for agricultural sector, exporters, small and medium enterprises are around 12%-12.5% at State-owned banks and 12.5%-13.5% at joint-stock banks while rates for other loans are from 13% to 15% per year. However, only banks’ close corporate clients can enjoy those rates while others are charged at least one percentage point higher.

The report also said that mobilization and lending rates could not decrease to the levels asked by the Government (deposit rate at 10% and lending rate at 12%) due to high pressure on inflation and banks’ difficulties in mobilizing fund.

The new report of the National Financial Supervisory Commission said that after changes to Circular 13, the capital flow has got bigger but basically it is still restricted by the loans-to-deposit ratio at 80% for banks.

In 2009, banks’ outstanding loans accounted for 96.93% of total mobilization, and the ratio was 92.96% in the first half this year. Reducing the ratio further to 80% from October 1 has also proved a hard nut to crack for many banks.

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Banks expected to reduce interest rates

Commercial banks are expected to lower interest rates on deposits and
loans in compliance with the State Bank of Vietnam's Circular 19, which
took effect on October 1.

The circular, issued on September 27, amended content in Circular 13 on capital-adequacy ratios.

The major adjustment is the redefinition of deposits, which would ease the pressure on banks to mobilise funds.

Because deposits from the State Treasury are counted in the banks'
mobilisation funds for lending, banks would be able to expand the number
of deposits.

Commercial banks' demand deposits from the State Treasury this year were estimated at 57 trillion VND (2.94 billion USD).

That amount is considered to be sufficient to use as a cheap source of
capital, and to balance the high interest rates on mobilised capital.

The circular also allows banks to use 25 percent of
non-term deposits from enterprises as a source of funding for lending.
It can be used because this source of non-term deposit is often stable
at 20 percent to 30 percent.

Three months of loans from other credit institutions can be added to funds for lending, according to the circular.

Small banks will be able to more easily access cheap capital from
larger banks, with the current interbank interest rate ranging from 8 to
9 percent.

After the circular took effect on October 1, the market showed signs of lower interest rates.

For example, Dai A Bank has eased deposit rates by 0.14 percent to 0.2 percent per year.

Customers with deposits in Vietnam dong for a one-month term and US
dollars for one to two months would be entitled to get interest rates of
10.95 percent per year, and 3.75 percent per year, respectively.

Nam A Bank has announced a lending programme of up to 1 trillion VND
(51.5 million USD) for small – and medium – sized enterprises'liquid
capital at interest rates of 13 percent for dong and 5 percent for the
US dollar.

Western Bank has lowered loan rates for
small enterprises by 1 percent, and transaction fees for the first three
months by 30 percent.

An Binh Bank has given priority to small enterprises by offering an annual 1 percent rate lower.

Phuong Dong Bank has cut car loan rates by 0.5 percent.

The Vietnam Banks Association (VNBA) has recently proposed that
commercial banks cut down highest deposit interest rate from 11.2
percent per year to 11 percent.

VNBA has also
suggested that banks slash the demand deposit interest rate from the
common rate of 4.8 percent to ease business expenses, which would lower
lending interest rates.

VNBA said that the deposit
rate for US dollars at commercial banks, at 4.7 percent to 5.2 percent
per year, is an emerging trend. The rates are currently very high in
comparison to the international market.

Therefore,
VNBA has urged commercial banks to reduce US-dollar deposit rates to
create a balance with dong-deposit rates, creating conditions for dong
interest rates to drop.

Le Tham Duong, head of the
business administration department of HCM City University of Banking,
said because the total outstanding loan growth had been quite low, banks
were entering an output race that would lead to the fall of both
deposit and loan interest rates in the near future.

Total trading volume in Vietnamese dong was 65.93 trillion VND (3.38
billion USD) during the final week last month, down 29.55 percent
against the previous week, according to a report issued by the State
Bank of Vietnam.

The dramatic decrease in interbank
trading signals that liquidity at banks has improved after the central
bank loosened capital regulations through the amendment of Circular 13
taking effect last week.

During the past two months, the trading volume hovered around 90-100 trillion VND (4.61-5.12 billion USD).

Average interbank trading increased slightly by 0.13-0.19 percent for
three month loans. Interbank trading has increased on average by
6.77-8.52 percent per year. Interest rates for loans that exceed three
months were down 0.06-0.48 percent to about 10.12-10.55 percent.

During the same period, total trading volume in the US dollar was also
15.37 percent to 2.52 billion USD. Interest rates for the dollar loans
were about 0.33-1.43 percent per year.

As of
September 27, credit growth in the banking industry was 19.27 percent.
Total loan allocation for property was 218 trillion VND (11.18 billion
USD), up 18 percent, loans for securities were up 19.8 percent to reach
15 trillion VND (769.23 million USD), loans for consumers increased by
19.7 percent to 151 trillion VND (7.74 billion USD).

Loans for agricultural and rural development and small and medium enterprises were up about 19-20 percent./.

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Industrial sector urged to surpass year's target

HCM CITY — The industrial production sector should strengthen production, investment and exports in the remaining months of the year to surpass the annual target set by the Government, says Vu Huy Hoang, Minister of Industry and Trade.

Speaking at an online – meeting to review the sector's performance in the first nine months and set tasks for the last three, Hoang said industrial production for the whole year is expected to increase by 14 per cent, higher than the Government's 12 per cent target.

Industrial production in the first nine months of the year surged 13.8 per cent year-on-year, reaching roughly VND574.5 trillion (US$30.24 billion), he said.

In September alone, industrial production was valued at VND70.7 trillion ($3.7 billion), up 15.1 per cent over the same period last year.

The fourth quarter is the most important stage since high growth in this stage will create the proper momentum for the sector to enter a new year, he said.

Although the sector has achieved strong growth in the past several months, industrial production has not created export products of high added value, mostly focusing on outsourcing products.

The sector's development efficiency therefore remains low while supporting industries have not developed, delegates at the meeting said.

In addition, power shortages and high interest rates have caused and will continue to cause difficulties for businesses, they added.

Hoang asked the Electricity of Viet Nam Group to co-operate with the Viet Nam National Petroleum Group (PVN) and Viet Nam Coal and Minerals Industries Corporation to step up efforts to meet power consumption demand.

PVN, for instance, should shorten the time taken for gas pipeline maintenance at its power plants in Ca Mau Province, he said.

"The power sector must ensure sufficient power supply for industrial production in any situation," Hoang stressed.

Regarding high bank loan interest rates and exchange rates, Hoang said the recent appreciation of the US dollar against the dong has benefited exporters, but caused difficulties for import companies.

He ordered relevant agencies to work with the State Bank of Viet Nam (SBV) to ensure sufficient supply of dollars for enterprises who need to import materials for their production.

He also suggested that the SBV reduces interest rates to support enterprises in developing their production and trading activities.

To ensure the sector's sustainable development, it needs to improve labour productivity, promote development of auxiliary industries and improve investment efficiency, said Le Van Duoc, director of the Planning Department under the Ministry of Industry and Trade.

Developing auxiliary industries would help businesses become more active in production and gradually reduce reliance on imports, he said.

Delegates at the meeting petitioned the Ministry of Industry and Trade to enhance the programme that brings Vietnamese goods to rural areas and set up distribution agents in these areas so that domestic products can gain a strong foothold in the rural market. — VNS

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Banks turn cautious about rate cuts

HANOI - Banks in Vietnam have received another call to lower interest rates, but neither the lenders nor the central bank are expecting any cuts to be large, said economists.

The Vietnam Banks Association, which acts as a mediator between the State Bank of Vietnam and lenders, called on banks last Wednesday for the third time in the past six months to cut dong deposit rates, this time to 11 percent from 11.2 percent by Oct. 15.

The association referred to amendments the central bank made to a new set of banking safety rules last Tuesday, suggesting that they would make it easier in future to raise deposits.

But the industry association had previously urged banks to slash deposit rates to 10 percent and lending rates to 12 percent by the end of September, and the new target of 11 percent appeared to reflect an understanding that macroeconomic developments were making it hard to bring rates down by much.

The association's request came as the Ministry of Planning and Investment said economic growth would reach 6.7 percent this year, exceeding the official target of 6.5 percent.

September annual inflation hit 8.92 percent, quickening for the first time in half a year.

"With current market movements, the recent decrease in interest rates is positive, but they cannot drop much more," the newspaper Vietnam Investment Review quoted government adviser Tran Du Lich as saying.

Many lenders considered the central bank's original set of safety rules too stringent. Lich said the amendments may not have a direct impact on rates, but they aimed to give banks with low liquidity more time to prepare for new requirements.

The central bank was also urging lenders to cut rates to help spur economic growth, but its enthusiasm appeared curbed by the 1.31 percent surge in consumer prices in September.

"Monetary policy needs to guarantee the two targets of boosting economic growth and containing inflation are met. It is necessary to cut interest rates, but it requires time and gradual steps", Nguyen Dong Tien, deputy governor of the State Bank of Vietnam, said last week.

But Le Dang Doanh, an independent economist, warned that a minor cut in rates would not be enough.

"Vietnam's economic growth this year has been fueled by public investment and an increase in exports. If interest rates remain high, businesses, especially those in the private sector, will feel the heat early next year," he said.

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Small firms steered towards higher interest consumer loans

Small companies are complaining that they are not able to access loans to do business unless they accept higher interest rates.

Nguyen Hai Son, who owns a small transport company in Hanoi, said he wanted to apply for a bank loan to buy three new cars to expand his business.

Son visited three banks and he was told that a corporate loan would only cover half of the cars' value. For a larger loan of up to 90 percent of the value, he was advised to take out consumer loans instead.

The problem is the interest rates on consumer loans are higher, at 16-18 percent a year compared to 13.5 percent on business loans. Son said his company is now stuck with either accepting high interest payments or being given much less money than needed.

Many other small companies also said they have been encouraged to get consumer loans to do business.

The government earlier this year ordered banks to bring down interest rates to make sure local businesses have enough capital. Borrowing costs are set to be cut to 12 percent and the deposit rate to 10 percent by the end of this year.

To ensure their profit targets are met, many banks have tried to boost consumer lending so that they can charge high interest rates.

Tran Xuan Quang, deputy general director of Bao Viet Bank, said banks do not have large amount of funds available for lending, so they try to choose clients who can bring them more profit.

Moreover, it would be easy for a business to meet consumer loans requirements, he said.

Economist Nguyen Duc Thanh of the Hanoi National University said small businesses are not large clients and it’s hard to tell whether their owners will use the loan for consumer or business purposes. As a result, they can be treated by bank rather harshly.

According to the central bank’s branch in Ho Chi Minh City, consumer loans as of the end of August accounted for 5.2 percent of total loans in the city.

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Gold deposit interest rates increase

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.

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Gold deposit interest rates increase

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 iniated 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 1.34 billion USD worth of gold, equivalent to about
36 tonnes. In August alone, Viet Nam exported 768 million USD 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 maret./.

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Interest rates rise for dollar deposits

Photo: Tuoi Tre

Several commercial banks have increased the annual interest rates they pay on US dollar deposits by 0.2 percentage points to an average of 4.5-5.2 percent, sparking worries of a new interest rate war.

Both Asia Commercial Bank and Eximbank have increased interest rates on three-month term deposits to 4.35 percent and on 12-month term deposits to 4.45 percent.

Vietcombank is offering 4.5 percent for a 12-monthterm deposit in US dollars while the Vietnam-Russia Bank, PG Bank and An Binh Bank are offering rates as high as 5.2 percent.

"In the latter part of the year the dollar supply is often limited, and to attract dollars, many banks raise interest rates," said Asia Commercial Bank deputy director Nguyen Thanh Toai.

Another senior official from the same bank who asked to remain anonymous said that the bank raised interest rates to hold onto its existing depositors and did not want to get involved in a new interest-rate war.

Total foreign currency deposits at the Ho Chi Minh City branch of the State Bank of Vietnam were down 4 percent last month against July to about $8.56 billion, according to the State Bank.

It was too early to tell whether a dollar shortage would solidify into a trend toward higher interest rates, said one treasury official at Vietcombank.

"The third and first half of the fourth quarter are the toughest time," he said. "December is the best time for dollars because of abundant remittance inflows and high export turnover."

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Interest rates rise for dollar deposits

Several commercial banks have increased the annual interest rates they
pay on US dollar deposits by 0.2 percentage points to an average of
4.5-5.2 percent, sparking worries of a new interest rate war.

Both Asia Commercial Bank and Eximbank have increased interest rates on
three-month term deposits to 4.35 percent and on 12-month term deposits
to 4.45 percent.

Vietcombank is offering 4.5 percent for a
12-monthterm deposit in US dollars while the Vietnam-Russia Bank, PG
Bank and An Binh Bank are offering rates as high as 5.2 percent.

"In the latter part of the year the dollar supply is often limited, and
to attract dollars, many banks raise interest rates," said Asia
Commercial Bank deputy director Nguyen Thanh Toai.

Another
senior official from the same bank who asked to remain anonymous said
that the bank raised interest rates to hold onto its existing depositors
and did not want to get involved in a new interest-rate war.

Total foreign currency deposits at the HCM City branch of the
State Bank of Vietnam were down 4 percent last month against July to
about 8.56 billion USD, according to the State Bank.

It
was too early to tell whether a dollar shortage would solidify into a
trend toward higher interest rates, said one treasury official at
Vietcombank.

"The third and first half of the fourth
quarter are the toughest time," he said. "December is the best time for
dollars because of abundant remittance inflows and high export
turnover."/.

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Credit sluggish as banks prefer bond purchases

Local commercial banks are more interested in bond purchases than providing loans, making the goal of lowering interest rates hard to reach, a senior government advisor said.

Interest rates have been high as capital flows do not move freely in the banking system in accordance with supply and demand, Le Duc Thuy, chairman of the National Financial Supervisory Commission, told Thanh Nien.

A tightened monetary policy has blocked money inflows, he said, noting that a restriction on interbank deposits prevents banks from lending their surplus cash to others.

The funds are flowing into government bonds instead, he said.

“At first look it seems like banks are losing money because they pay 11.2 percent on deposits and then invest in bonds with a yield of 10 percent,” Thuy said. “But in fact banks can use government bonds to get loans at the central bank’s refinancing rate of only 7 percent, hence (they make) a profit.”

“This is how banks have been doing their business, and it makes sense they are not interested in lending,” he said.

Thuy said the government should have sold its bonds to the central bank because right now it’s large commercial banks that benefit the most, leaving interest rates at high levels.

Prime Minister Nguyen Tan Dung in May told the State Bank of Vietnam to order lenders to bring down borrowing costs to 12 percent and cut the deposit rate to 10 percent.

The central bank said Wednesday that deposit rates were between 10.6 percent and 11.2 percent while lending rates ranged from 12 percent to 15 percent.

Vietnam’s “repeated” calls for commercial banks to lower their lending rates after tightening policy may damage market confidence, the International Monetary Fund warned this week.

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Credit sluggish as banks prefer bond purchases

Local commercial banks are more interested in bond purchases than providing loans, making the goal of lowering interest rates hard to reach, a senior government advisor said.

Interest rates have been high as capital flows do not move freely in the banking system in accordance with supply and demand, Le Duc Thuy, chairman of the National Financial Supervisory Commission, told Thanh Nien.

A tightened monetary policy has blocked money inflows, he said, noting that a restriction on interbank deposits prevents banks from lending their surplus cash to others.

The funds are flowing into government bonds instead, he said.

“At first look it seems like banks are losing money because they pay 11.2 percent on deposits and then invest in bonds with a yield of 10 percent,” Thuy said. “But in fact banks can use government bonds to get loans at the central bank’s refinancing rate of only 7 percent, hence (they make) a profit.”

“This is how banks have been doing their business, and it makes sense they are not interested in lending,” he said.

Thuy said the government should have sold its bonds to the central bank because right now it’s large commercial banks that benefit the most, leaving interest rates at high levels.

Prime Minister Nguyen Tan Dung in May told the State Bank of Vietnam to order lenders to bring down borrowing costs to 12 percent and cut the deposit rate to 10 percent.

The central bank said Wednesday that deposit rates were between 10.6 percent and 11.2 percent while lending rates ranged from 12 percent to 15 percent.

Vietnam’s “repeated” calls for commercial banks to lower their lending rates after tightening policy may damage market confidence, the International Monetary Fund warned this week.

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Credit card growth sluggish despite incentives

Many banks in Vietnam have tied up with electronics stores, supermarkets, restaurants, spas, and others to offer discounts to card users

High interest rates, annual fees and safety considerations have prevented the credit card industry from getting off to a roaring start in Vietnam.

Although both domestic and foreign banks have launched several promotion programmes, they still have failed to attract enough customers to use credit cards for their shopping and other needs.

Because they expect the market to be a lucrative one in the future, the banks are pushing the use of cards so as to acquire and expand their market share.

The promotion campaigns have included direct marketing and the granting of credit cards without any fees.

Ho Anh Ngoc, head of retail banking in the southern region for Techcombank, said his bank plans to increase the number of its credit card users to 23,000 by the end of this year. It is targeting customers from all income segments.

Other banks such as Vietcombank, Eximbank, Asia Commercial Bank have launched their own promotions to expand the use of credit cards.

Customers travelling to Singapore between August 27 and September 30, can get a set of X-mini Capsule speakers from Eximbank if they spend at least $500 using their Visa card over three days.

Phi Thi Phuong, head of Eximbank's card management department said since early this year, Eximbank has issued 4,000 credit cards, increasing the total number of customers to 30,000.

To attract more customers, international banks like HSBC and ANZ have sought to increase their market share by marketing on websites and through emails and phone calls to customers.

The banks have also linked up with trade centres and supermarkets to offer discounts for those using Visa or MasterCard for their shopping.

Hoang Long, who works for a transportation company in District 3, said he received an invitation to open a credit card from ANZ, but failed to get one because his monthly salary was less than VND5 million (US$256).

Furthermore, late payments on a Visa card attract very high interest rates of between 1.5 percent to 1.9 percent per month, and this is something that gives pause for thought to Vietnamese clients.

HSBC and Techcombank levy overdue fees of 1.87 percent and 1.6 percent per month respectively.

Card owners also have to pay other kinds of fees.

Nguyen Tu Anh, director of Smartlink Card Joint Stock Co, said customers have to pay considerable attention to opening fees, annual costs, loan rates and exchange rates for international payments.

Hai Duyen, a regular customer of Techcombank, said credit cards were not all as safe as presumed. Recently, she had her pocket picked, and lost VND20 million ($1,025) through her visa card.

According to Duyen, credit cards do not require any password like the ATM card. Thieves can use a forged signature.

Moreover, Vietnamese customers are still not used to using cards for their shopping, and prefer to use cash instead.

Also, many shopping centres are yet to install POS machines to accept credit card payments.

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Credit card growth sluggish despite incentives

High interest rates, annual fees and safety considerations have
prevented the credit card industry from getting off to a roaring start
in Vietnam.

Although both domestic and foreign
banks have launched several promotion programmes, they still have failed
to attract enough customers to use credit cards for their shopping and
other needs.

Because they expect the market to be a
lucrative one in the future, the banks are pushing the use of cards so
as to acquire and expand their market share.

The promotion campaigns have included direct marketing and the granting of credit cards without any fees.

Ho Anh Ngoc, head of retail banking in the southern region for
Techcombank, said his bank plans to increase the number of its credit
card users to 23,000 by the end of this year. It is targeting customers
from all income segments.

Other banks such as
Vietcombank, Eximbank, Asia Commercial Bank have launched their own
promotions to expand the use of credit cards.

Customers travelling to Singapore between August 27 and September
30, can get a set of X-mini Capsule speakers from Eximbank if they spend
at least 500 USD using their Visa card over three days.

Phi Thi Phuong, head of Eximbank's card management department said
since early this year, Eximbank has issued 4,000 credit cards,
increasing the total number of customers to 30,000.

To attract
more customers, international banks like HSBC and ANZ have sought to
increase their market share by marketing on websites and through emails
and phone calls to customers.

The banks have also
linked up with trade centres and supermarkets to offer discounts for
those using Visa or MasterCard for their shopping.

Hoang Long, who works for a transportation company in District 3, said
he received an invitation to open a credit card from ANZ, but failed to
get one because his monthly salary was less than 5 million VND (256
USD).

Furthermore, late payments on a Visa card
attract very high interest rates of between 1.5 percent to 1.9 percent
per month, and this is something that gives pause for thought to
Vietnamese clients.

HSBC and Techcombank levy overdue fees of 1.87 percent and 1.6 percent per month respectively.

Card owners also have to pay other kinds of fees.

Nguyen Tu Anh, director of Smartlink Card Joint Stock Co, said
customers have to pay considerable attention to opening fees, annual
costs, loan rates and exchange rates for international payments.

Hai Duyen, a regular customer of Techcombank, said credit cards were
not all as safe as presumed. Recently, she had her pocket picked, and
lost 20 million VND (1,025 USD) through her visa card.

According to Duyen, credit cards do not require any password like the ATM card. Thieves can use a forged signature.

Moreover, Vietnamese customers are still not used to using cards for their shopping, and prefer to use cash instead.

Also, many shopping centres are yet to install POS machines to accept credit card payments./.

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Cost of borrowing declines

HA NOI — The interest rate on loans at commercial banks from August 20-26 was lowered by 1 per cent to about 13 per cent per year.

This move aims to boost the economy after the State Bank of Viet Nam injected capital into the market to improve liquidity.

State owned banks are charging exporters, farmers and rural developers between 12-13.5 per cent per year for both short and long term loans. Private banks charge between 12-14.5 per cent.

The total trading volume on the inter-bank market was VND101.22 trillion ($5.19 billion) in Vietnamese dong and US$1.96 billion in US dollars, up 3.9 per cent and 1.8 per cent, respectively.

Most tradings in dong were made overnight and during the week. Overnight interest rates for the dong rose 0.08 per cent.

Average short term interest rates ranged from 6.78 per cent to 8.56 per cent per year.

The highest lending interest rate was 12 per cent and the lowest interest rate was 6 per cent.

The exchange rate hovers around VND19,480-19,500 per US dollar after the dong depreciated by 2 per cent last week. — VNS

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Commercial banks now cashed up

Commercial bank liquidity has improved dramatically since the State Bank of Vietnam injected a heavy volume of capital at reasonable interest rates into the open market in July.

The volume of valuable paper trading remained at about VND32-56 trillion (US$1.64-2.87 billion) from July to August.

It even climbed to VND110 trillion ($5.64 billion) in late June.

But the volume had fallen seven fold to VND7.72 trillion ($395.79 million) as of August 20.

"The reduction was very surprising," Thang Long Securities said in a report issued last week.

"It reflects the improvement in bank liquidity."

An Binh Bank's deputy general director Pham Quoc Thanh said: "A flexible monetary policy will help bank liquidity remain healthy until the year-end. Supply and demand will be balanced and interest rates will be stable."

In order to boost lending, banks like ABBank, Lien Viet Bank, HD Bank and Asia Commercial Bank are reducing borrowing costs to 10.7-11.7 percent per year for manufacturers, exporters, small and medium sized enterprises.

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Commercial banks now cashed up

Commercial bank liquidity has improved dramatically since the State Bank of Vietnam injected a heavy volume of capital at reasonable interest rates into the open market in July.

The volume of valuable paper trading remained at about VND32-56 trillion (US$1.64-2.87 billion) from July to August.

It even climbed to VND110 trillion ($5.64 billion) in late June.

But the volume had fallen seven fold to VND7.72 trillion ($395.79 million) as of August 20.

"The reduction was very surprising," Thang Long Securities said in a report issued last week.

"It reflects the improvement in bank liquidity."

An Binh Bank's deputy general director Pham Quoc Thanh said: "A flexible monetary policy will help bank liquidity remain healthy until the year-end. Supply and demand will be balanced and interest rates will be stable."

In order to boost lending, banks like ABBank, Lien Viet Bank, HD Bank and Asia Commercial Bank are reducing borrowing costs to 10.7-11.7 percent per year for manufacturers, exporters, small and medium sized enterprises.

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