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State Bank tries to prevent banks from increasing their interest rates

In Uncategorized on December 16, 2010 at 10:04 am

The State Bank of Vietnam has ordered its branches to monitor all other banks that have an interest rate higher than 14 percent a year.

The State Bank is trying to prevent banks increasing interest rates

On Wednesday, Vietnam Technological and Commercial Joint Stock Bank (Techcombank) raised its one month interest rate to 17 percent per year, which will apply from 8-10 December with deposits of more than VND100 million.  As soon as this happen, other joint stock banks, also changed their interest rates to 17.5 and 18 percent a year.


Specifically, the floating interest rate of 36 month deposit of a bank was rebounded up to 18 percent a year, for all deposits over VND5 million.


Ho Huu Hanh, director of the State Bank of Vietnam in Ho Chi Minh City, said he has asked four delegations to investigate the banks about the skyrocketing interest rate.


This discision immediately made some banks reduce their interest rate from 17-18 to 14 percent a year.


An official from Techcombank said, “That it had not increased the interest rate of savings deposit to 17 percent, but it was only a promotional program for those long term customers”.


Furthermore, the State Bank in Hanoi has expressed their disagreement with the rising interest rate, saying it that it gave some banks an unreasonable advantage, which may lead to unfair competition.


Techcombank’s action had lead to a movement of deposits from other banks, forcing them to elevate their interest rates.


Meanwhile, Nguyen Duc Vinh, general director of Techcombank, admitted his bank had not being able to anticipate this affect, and has promised to cancel the program.


After the meeting, thousand of banks, agreed to lower their rate to 14 percent a year.


A spokesperson from the State Bank said, “The inflation rate this year will not exceed 12 percent, so, there is no reason for banks to raise their interest rate to 17-18 percent a year”.


In a related move, the State Bank has pledged to provide loans to smaller banks. All these banks require is to present their credit contracts, to the State Bank, to approve their for loans.


However, a joint stock bank’s leader said, “Some small banks are afraid to borrow capital, because they will be closely monitored by the State Bank, and this will lead to the larger banks raising their interest rates again”.

Source: SGGP

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