Rate cut fears increase longer term bank deposits in Vietnam

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Many clients at commercial banks, fearing that interest rates will fall further, are shifting away from one-month deposits to longer-term savings, news website VnExpress reported.

Le Quang Trung, deputy general director of Vietnam International Bank (VIB), said many clients at his bank have switched from one-month deposits to three-month ones since early March.

This is a positive trend for the banking system, he said, noting that deposits of one month used to account for up to 80 percent of all deposits.

He said depositors are seeing signs that the economy is stabilizing, including a slowing of inflation and a strengthening dong. Consumer prices rose by less than 3 percent in the first quarter, which means this year's target of keeping inflation in single digits is within reach, Trung added.

The State Bank of Vietnam in mid-March reduced the maximum rate that commercial banks can pay for dong deposits from 14 to 13 percent.

A banker in Ho Chi Minh City said after the cut, more depositors opted for longer terms from two to six months.

"It's likely that they fear interest rates will fall when inflation is under control, so they want to go with deposits of longer terms," he said.

While terms of one year or more are still being neglected by depositors, it's good enough to see an increase in deposits longer than one month, he added.

VIB is paying around 11 percent a year on long term deposits. Vietinbank offers between 9 and 9.5 percent for deposits of 12 months or longer, VnExpress reported.

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