Interest rates on dollar deposits have fallen to as low as 1.55 percent in Vietnam after the central bank lowered the rate cap to support the local currency.
News website VnExpress reported Sunday that Techcombank now offers between 1.55 and 1.75 percent for dollar deposits. These are the lowest rates compared to an average 2 percent offered by almost all other banks, according to the report.
The State Bank of Vietnam lowered the rate cap on dollar deposits by individuals to 2 percent from 3 percent, and cut the limit for institutions to 0.5 percent from 1 percent, starting June 2. Banks have also been ordered to set aside more dollars as reserves.
Nguyen Van Le, general director of Saigon-Hanoi Bank, said the rate cut will create a larger gap between dong and dollar interest rates, encouraging more people to switch to dong deposits.
The State Bank of Vietnam now caps interest rates on dong deposits at 14 percent.
Ly Xuan Hai, general director of Asia Commercial Bank, told Thanh Nien that the new central bank's moves will increase dollar supply for the banking sector and keep the dollar from getting stronger against the dong.
"But how much the dollar costs will depend on efforts to control trade deficit and gain public confidence in monetary policies," he said.