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Higher interest rates fail to lure savers   2009-12-15 - TBKTSG

Though commercial banks have raised deposit interest rates with the central bank’s blessing, still there’s no upsurge in deposits.


A State Bank circular in early December that raised the ‘basic interest rate’ from seven to eight percent per annum has allowed banks to raise both the deposit and lending interest rates they charge their customers.  Thoi Bao Kinh Te reports that commercial banks are now paying as much as 10.49 percent on one year dong deposits – the most the State Bank seems inclined to permit.


But in fact, the actual interest rates offered by many banks are higher than 10.49 percent one considers the gifts, lucky draws and other inducements offered clients in an effort to mobilize more capital.


Even the big state-owned banks are pushing up rates, though they typically offer lower interest rates than joint stock banks.  A bank executive confided that some depositors at his branch can earn 11 percent yearly return on a three month term deposit.  “All banks are offering rates higher than quoted levels to big clients,” he said. 


However, he added, the high interest rate has not helped much in mobilizing capital.  Smaller joint stock banks have confirmed this, adding that because all banks are posting the same rates, they cannot attract depositors with theire interest rate policies anymore.


Few loans for new clients


Since banks cannot mobilize much capital, they do not have money to lend to new clients.


A senior officer of Mien Tay Joint Stock Bank says that his bank gives priority to loans to established business clients; it does not have money to loan to new clients.


Meanwhile, the director of a branch of a state-owned bank says that his clients, whether businesses or individuals, will have to wait until next year, because his branch has no ‘quota’ for loans for this year.


Tuoi Tre on December 8 quoted a State Bank report that the capital mobilization growth rate of the whole banking system reached 27 percent per annum by the end of the first  week after the decision on raising basic interest rate became valid. Meanwhile, the growth rate for outstanding loans was 36 percent.

In related news, though banks have been facing difficulties in expanding credit, profits are holding up nicely. However, the banks say the profit has come from non-lending services.

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