Rates up, in part due to rice, coffee schemes

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Short-term money market rates in Vietnam pushed higher on Monday as banks sought fresh funds to meet demand from the rice and coffee sectors in particular, bankers said.

Banks have also raised deposit rates through various promotional packages to attract funds.

Interbank rates had fallen in late February when money started flowing back into bank accounts after the Tet holiday, but the one-week lending rate rose to 8.35 percent on Monday from 8.14 percent last Friday and 8.0 percent on Feb. 26, according to Reuters data.

Outstanding loans at the end of February rose 1.4 percent from the end of 2009 and money supply increased 1.39 percent, while deposits fell 0.17 percent, the central bank said.

"Banks need to pay attention to stepping up marketing to help raise funds," State Bank of Vietnam Governor Nguyen Van Giau was quoted as saying in a central bank statement on Monday while meeting with Mekong Delta-based bankers at the weekend.

If the value of cash prizes and other promotions that banks started offering last week is taken into account, deposit rates stand at 12.5-14.0 percent, above the 10.5 percent ceiling major banks agreed to adhere to in late 2009, Monday's Securities Investment magazine said.

Demand for funds has risen in part because of government-backed plans to stockpile 200,000 tons of coffee and 1 million tons of rice, which could cost as much as VND12.92 trillion.

Last week the central bank asked banks to prepare funds to help rice companies buy 1 million tons of husked grain, equivalent to 2 million tons of paddy, to prevent prices falling further when the harvest peaks this month in the Delta.

That would require at least VND8.4 trillion, given Mekong Delta paddy stands at VND4.2 million a ton.

In addition, the government has urged the Agriculture Ministry and central bank to help companies buy coffee when prices fall, according to a statement on Monday on the central bank's website .

Traders and industry officials said coffee stockpiling could start this month.

Banks would need at least VND4.52 trillion, based on Monday's domestic price of VND22.6 million per ton in the Central Highlands coffee belt.

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