Vietnam banks lower deposit rate as credit drops

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Vietnam banks lower deposit rate as credit drops

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More money is coming into banks than out of them, with credit dropping 1.66 percent from late 2013, pushing deposit interest rates down, the State Bank of Vietnam said Friday.
It said the development is not strange as consumption and capital demands often slow in the first months of a new year.
As commercial banks were in almost full stock, the state lender did not have to provide further funding during the Lunar New Year Festival.
Their surpluses have prompted banks to lower deposit rates by 0.3-0.5 percentage points for one or two months terms, and all deposits lower than six month terms to below 7 percent a year, the bank said in a Thoi bao Kinh te Saigon Online report.
The dollar-dong rate was stable during the first two months and the state bank is set to increase its foreign reserves.
Governor Nguyen Van Binh told a government session earlier the same day that the bank has bought more than US$4 billion this year.
The central bank is keeping close watch of the nine weakest banks in the system, considering their restructuring plans, including increases in foreign ownership.
A government resolution taking effect February 20 allows foreign strategic investors to own up to 20 percent of a commercial bank, up from the current 15 percent.
But the total foreign ownership limit remains 30 percent, which, according to experts, will fail to attract foreign investment in banks.
The Vietnam Association of Financial Investors has suggested that the cap be raised to 49 percent.
The Vietnam Asset Management Co. (VAMC), which is run by the central bank, said it has bought VND39 trillion ($1.85 billion) of bad debt from the banking system since it became operational last July.
Nguyen Quoc Hung, vice chairman of the company, told the newspaper it plans to buy a further VND10 trillion of bad debt in the first quarter.
The company has said it would issue VND31 trillion of ($1.47) in bonds from the lenders for the bad debts.
Banks in Vietnam managed to cut bad debt to 3.63 percent of loans at the end of 2013, from 4.73 percent last October, the central bank said in the statement issued February 21.

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