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Deposit interest rates rise above lending rates   2009-05-04 - DTCK

With the support of the Government’s anti-fiscal crisis 4% lending interest rate subsidy programme, loan interest rates have become even lower than the rates paid for deposits.


Under present regulations, with the basic interest rate at 7% per annum, the ceiling lending interest rate is 10.5%. However, taking advantage of the 4% interest rate subsidy programme, businesses are borrowing money at 6.5% at maximum.  In many special cases, preferred clients can borrow capital at less than 6.5%.


Meanwhile, the deposit interest rates applied by commercial banks are higher than 6.5%. Vietcombank, for example, will pay 7.3% per annum for three month term deposits, 7.5% for six month term deposits, and 7.7% for 12 month term deposits.  At Vietinbank, the rates are 7% per annum for 3 month, 7.2% for six month, and 7.7% for 12 month term deposits.


Techcombank is paying 7.45, 7.65 and 7.9% for these term deposits.  Habubank is paying even more: 7.7%, 7.9% and 8.2%., the interest rate for 3 month term deposit is 7.7% per annum, while the rate for six month term deposit is 7.9% per annum, and 8.2% for 12 month term deposit.  The highest rates are SCB’s 7.85%, 8.1% and 8.2% per annum respectively.


In effect, a situation has been created that makes is potentially profitable for businesses to borrow money at low interest rates under the interest rate subsidy programme and then deposit the money at banks to profit from the interest rate spread.


A Hanoi bank executive confirmed this.  He said that the thing is possible in principle, as businesses always consider how to use their money in the most effective way.  “However, it is not so easy to borrow money from one bank to deposit at another bank, because all the banks, fearing credit risks, are trying to control disbursements strictly,” he said.


The director said that it would be quite normal for businesses to borrow money from banks even though they still have money in their coffers.  They may need to borrow money because they have to hold reserve funds for liquidity or prepare for payments due.

Meanwhile, Tran Phuong, Director of the Planning and Development Division of the Bank for Investment and Development (BIDV), asserted that “it is impossible for businesses to borrow money from one bank to deposit at another bank.  That can occur only when bank’ staffs do not strictly control the disbursement process. If staff regularly examine disbursals, businesses will not be able to use money for wrong purposes.”


The VND interbank interest rate is tending to increase across the board. For 12 month loans, the interest rate has reached the 9% per annum threshold.

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