Partly private lender Dong A Bank has been banned from opening new branches for a year after one of its branches was found violating the deposit interest rate ceiling of 14 percent.
The central bank said it would also not allow the bank to install new automated teller machines during the period, local media reported Thursday.
The punishment is a sign the State Bank of Vietnam is taking stronger efforts to bring interest rates down and stop local lenders from breaking the deposit rate cap, an illegal but widely practiced act among banks.
According to the Vietnam News Agency, Dong A's branch in the southern province of Tay Ninh agreed to pay 15.5 percent on a deposit of VND1 billion, higher than the 14 percent cap. The surplus 1.5 percent interest was offered to the depositor in the form of an extra cash reward.
Its director, Nguyen Thai Hau, has been suspended from his position after central bank inspectors discovered the violation this week.
The State Bank of Vietnam had previously warned lenders that they would be "strictly" punished if found violating interest rate regulations. The central bank also encouraged lenders to report violations by other banks.