Right after the State Bank of Vietnam raised the basic interest rate from seven to eight percent per annum, thus raising the ceiling interest rate to 12 percent from 10.5 percent, economists warned of a new interest rate race.

Commercial banks, which find it hard to mobilize capital at this moment, may attempt to raise deposit interest rates further, when they have a “higher ceiling”.

Governor of the State Bank of Vietnam on November 25 had a working session with leaders of the state owned banks, Vietnam Bank for Foreign Trade (Vietcombank), Vietnam Industrial and Commercial Bank (Vietinbank) and the Vietnam Banking Association.

A decision was reached that state owned banks, which are now holding the biggest market share, will not apply overly high interest rates in order to help stabilize the market. The highest rate for VND deposits will not be higher than 10.5 percent.

If credit institutions offer overly high interest rates which break the common interest rate, they will face a visit from state bank inspectors.

The governor of the State Bank of Vietnam has also requested commercial banks take action to control credit growth in 2009 and early months 2010. Especially, the banks have been requested to tightly control

loans for securities investments, real estate and take measures to ensure liquidity.

The Vietnam Banking Association has promised to persuade member banks to implement the new decisions by the State Bank.

Currently deposit interest rates are between 9.5 and 9.99 percent. In some special capital mobilization programmes, the deposit interest rate is higher at 10.2 percent per annum.

 Source: Vietnam Net