After several months of racing to slash interest
rates, banks have begun raising the deposit interest rates in order to
retain depositors. Besides, banks need to increase ‘collecting’ capital
to prepare for the Government initiated demand stimulus program.


VP Bank and Ocean Bank were the two banks that ‘opened
fire.’ VP Bank has raised the deposit interest rates for all term
deposits, with the lowest increase at 0.15% per annum (3 and 4-month
term deposits) and the highest increase at 1% (36 month term deposit).


Depositors now enjoy the highest interest rate at 8% per annum if they make 36 month term deposits.


Ocean Bank has only adjusted the interest rates for
the 9-month and longer term deposits with interest rate increases of
between 0.2% and 0.7%. The highest interest rate the bank is offering
is 8.2% per annum, applied to the 12-month term and longer deposits


A common trend in the interest rates applied by the
two banks is that the higher interest rates are offered for the
longer-term deposits, which proves to come in regular laws in the
context of the stable market.


Last year, when the market faced liquidity problems,
banks applied higher interest rates for shorter-term deposits, while
the highest interest rates were applied to 3-9 month term deposits.


Explaining the rise of interest rates, Nguyen Thanh
Binh, Deputy General Director of VP Bank, said that the bank needs to
prepare capital to meet the demand for loans from clients. VP Bank
plans to reserve VND6 trillion for loans under the Government’s demand
stimulus plan. The bank has disbursed VND300 billion so far this month.


The VND interbank interest rates last week seemed to
increase only slightly in all terms of deposits; however, the increases
were modest, less than 0.1% per annum. The 1 month term saw the highest
increase of 0.85% per annum, while the 12 month term interest rate was
the highest, at 8.17% per annum.


General Director of Lien Viet Bank Nguyen Duc Huong
said on February 21 that the bank had not adjusted the deposit interest
rates yet, but the bank will keep a close watch over the market
performance in order to make suitable decisions.


Huong believes that raising deposit interest rates is
necessary for all banks, especially as they are joining the
Government’s demand stimulus program. Besides, banks also need to raise
the deposit interest rates because they fear depositors may withdraw
capital from banks once the interest rates are too low and unattractive.


“There have been signs of clients withdrawing deposits
from banks to pour money into other investment channels, like real
estate, gold and foreign currencies. The massive capital withdrawal may
occur with any banks if they keep low interest rates,” Huong said.