Despite the State Bank of Vietnam’s recent ban, many commercial banks are still trying to apply a deposit interest rate of 14% or more.
One loophole that has been commonly used is simply not recording the “bonus” interest rate for depositors, or offering them promotional gifts. The result is that the actual interest rate exceeds the 14% allowed by the state bank.
Some bank patrons will deposit around VND1 billion (USD47,927) at a time, and often get an actual interest rate of over 14% per year after reaching tacit agreements with the banks.
Customers who deposit large sums of money will often get a “bonus” added to their official interest rate, adding, perhaps 4%. Commercial banks get away with this by not including it in their records. There are many other promotion programmes to get around the regulations.
Representatives from some banks have said that, without these incentives, they will lose customers, market share and liquidity.
The General Director of one commercial bank commented that, in the first two months of this year, deposits increased by VND10 billion (USD478,271) since late 2010. However, in early March, up to VND50 billion (USD2.39 million) has been withdrawn from the bank. The reason is due to the bank’s application of the interest rate cap.
He added that the race to attract deposits will become very tense in the coming months, adding that, the efforts of commercial banks trying to find ways around the interest rate cap is inevitable. Since such bonuses and promotions will not be kept on the bankbooks, it could cause problems for regulatory agencies to keep track of actual interest rates.
The SBV's March 3 circular capping interest rates at 14% was a reaction to the high interest rates offered by many commercial banks, in many cases upwards of 17%. The banks have did this in an effort to increase their liquidity.
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