Banks raise interest rates on dong deposits

Commercial banks have lifted interest rates on dong deposits yet again to rescue client profit against the backdrop of high inflation.

Banks have said that the rate hike favors depositors as inflation continues to outstrip interest rates and erase any possible gains.

"Those depositing in dong are losing out," said deputy general director of the Western Bank, Nguyen Quoc Sy.

Today, a customer who deposits in dong for a nine-month term with monthly interest of 0.78%, would receive 7% interest on the deposit at the end of the term.

The consumer price index had increased by 9.45% in the first 11 months of the year to November, prompting a negative interest rate on most deposits.

Interest rates on US dollar deposits are also restricted after an increase two months ago. People with savings in dong might consider turning to the greenback, given that the local currency in Vietnam depreciates around 0.5%.

Many people with idle money but no investments still prefer banks however, citing the low risk ratio of the saving measure.

According to the State Bank of Vietnam’s Hanoi branch, total capital by commercial banks and credit institutions has reached VND341.7bil so far this year, up 36 per cent over the end of last year.

Banks are likely to continue to increase interest rates on dong deposits. Experts remain concerned that high interest rates may cause businesses to curtail investments, which will reduce the nation’s GDP and send unemployment to undesirable levels.

source: http://english.vietnamnet.vn