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Upward trend in bank interest rates



VietNamNet Bridge – At the beginning of December some banks cut deposit interest rates by 0.1-0.2 percentage points.

The Bank of Investment Development of Viet Nam (BIDV) reduced the interest rate on non-term deposits from 0.3 per cent to 0.2 per cent, and on 36-month deposits, from 7 per cent to 6.8 per cent.

The Agriculture and Rural Development Bank cut its non-term deposit interest rate from 0.5 per cent to 0.3 per cent.

The Sai Gon Thuong Tin Joint Stock Commercial Bank (Sacombank) reduced the interest on short-term deposits by 0.1 percentagage point.

But analysts believe not all banks will buy into this trend, with some thinking that the interest rates might even go up later this month and in the early part of the new year.

They said the interest rates are beginning to come under relentless pressure since the dollar has started to appreciate strongly after the US Federal Reserve (FED) recently increased interest rates and indicated more rate hikes are to come.

This is likely to encourage people to shift from the dong to the dollar, which will threaten banks’ đong liquidity.

Thus, many banks have plans to increase deposit interest rates to improve their liquidity since lending activities usually surge now, the year’s peak business season.

The liquidity is also affected by other factors.

By November, the banking sector’s credit growth rate reached 15.8 per cent.

This means that to realise the year’s credit growth target of between 18 and 20 per cent, banks would have to accelerate mobilisation of deposits to ensure they have enough liquidity to fund their lending.

The analysts said bad debts have also had an impact on interest rates.

According to the State Bank of Viet Nam, since 2013 the Viet Nam Asset Management Company (VAMC) bought bad debts totally worth VND262.054 trillion (about US$11.65 billion) from banks, but has recovered only VND37.938 trillion ($1.67 billion), or just 15 per cent.

This has a lingering impact on the financial ability of many credit institutions.

Besides, new bad debts continue to plague some of the banks.

BIDV, for instance, in the first nine months of this year reported bad debts of VND13.217 trillion ($587.42 million), or 1.96 per cent of its outstanding loans.

Notably, irrecoverable debts increased to VND7…

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