Vietnam loan rates fall as deposit cap imposed

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Banks in Vietnam have lowered deposit rates to comply with an industry-imposed cap of 11.5 percent over the past week, from nearly 12 percent earlier, and bankers said there were signs that lending rates were easing too.

The Vietnam Banks Association had asked banks to cut their dong deposit rates to 11.5 percent from nearly 12 percent last week.

Early this month, banks started raising rates on deposits and they offered promotions, which a banking association statement said distorted actual deposit rate levels.

Many banks are now offering dong loans at 13.5-15 percent, based on quotations on their websites. Banks started cutting lending rates to around 14-15 percent earlier this month from 16-18 percent in February and March.

A dealer with a Hanoi-based bank said a spread of 3 percentage points between deposit rates and lending rates would be sufficient for banks to make a profit.

It would be easier for banks now to raise deposits than in the first quarter, because the government had closed all gold trading accounts and the stock market had not picked up, an executive at another bank in Hanoi said.

"Both loans and deposit rates probably have further to fall in coming months", he said.

State Bank of Vietnam Governor Nguyen Van Giau told bank executives last week the central bank would use various tools to gradually lower interest rates, a central bank statement said.

The central bank has supported the trend of falling rates by injecting cash into the financial system in open market operations, a trader with a Japanese bank said.

"The interbank market may stay stable till the end of the second quarter," he said, adding that lower deposit rates would enable banks to further cut lending rates.

Fixings for dong loan rates with terms from two weeks to three months dropped on Monday on the interbank market to the lowest level in at least 22 days, Reuters data showed.

Two-week rates fell to 8.20 percent from 8.33 percent a week ago and 9.03 percent on March 23.

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