Vietnam banks rush to raise dollar saving rates

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Commercial banks have pushed dollar deposit rates to as high as 6.1 percent over the past two weeks as they are trying to attract strong remittance inflows that come in ahead of Tet, the lunar new year festival, bankers said.

They also said lenders are trying to mobilize more dollars in order to meet the increasing demand of companies which import a large volume of goods in preparation for the country's biggest holiday.

On January 12, the Vietnam Thuong Tin Commercial Joint-Stock Bank (VietBank) increased interest rates on dollar deposits by 0.9 to 1.3 percent per annum for one to 36-month terms.

In particular, the lender now offers the rate of 5.9 percent on six-month dollar deposits and 6 percent on 12-month deposits, excluding other incentives.

Vietnam Tin Nghia Bank, meanwhile, have boosted dollar deposit rates to as high as 6.1 percent.

At other small commercial banks like Kien Long Bank, Orient Commercial Bank, Saigon Commercial Bank, and An Binh Bank, dollar deposit rates have been increased to between 5 and 5.6 percent per annum.

Meanwhile, big banks which have sufficient reserves or stable sources for the greenback like Eximbank, ACB, and Sacombank have kept their deposit rates unchanged at below 5 percent.

Le Dang Khoa, deputy general director of Western Commercial Bank, said that commercial banks are trying to absorb more dollars as enterprises prefer to take out dollar loans at low rates averaging 8 percent per year far lower than those charged on loans made in the dong, which is now around 18 percent.

Experts said the high dollar deposit rate would encourage people to hold on to the greenback.

Speaking at a seminar last month, Le Xuan Nghia, vice chairman of the National Financial Supervisory Commission, said the central bank should put a ceiling on dollar deposits.

Although the central bank has asked banks to limit dollar credit, the total amount of outstanding loans in the greenback still grew strongly in 2010.

As of end-2010, the overall credit growth was 27.6 percent against late 2009, but the growth in dollar credit was 37.7 percent as against the growth in dong credit of 25.3 percent.

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