Hanoi (VNS/VNA)๊ - The State Bank of Vietnam (SBV) said it will closely monitor interest rates offered by credit institutions and take measures to strictly handle violations of the law, including cutting credit growth targets.

This is main part of the SBV’s new document on mobilisation interest rates of credit institutions. It was made as many commercial banks are racing to mobilise capital, luring customers with deposit interest rates of up to more than 9 percent or 10 percent per year. According to economist Nguyen Tri Hieu, the central bank’s move is a timely effort to stabilise the money market and interest rates. Hieu said commercial banks’ increase of deposit interest rates means demand for capital is rising to meet their credit growth targets. “In the current period, this increase is made up after the central bank issued regulation of reducing the ratio of short-term capital used for medium- and long-term loans from current 40 percent to 35 percent by 2020 and 30 percent by 2021," he said. VietCapital Bank offers the highest interest rate in the local market, at up to 10.2 percent per year for a term of 60 months, 9.5 percent for 24-month term, 9.8 percent for 36 months and 10 percent for 48 months. Meanwhile, TPBank offers a rate of 8.6 percent per year for new deposits of 500 million VND (21,500 USD) or more.  Statistics of the SBV show 15 banks, nearly half of the banks in the banking system, have offered high interest rates from 8 percent per year, much higher than that of early this year. The rates have been on an upward trend and there is no sign of cooling down, especially as the season of year-end capital supply for the economy approaches. According to Hieu, the increase of commercial banks' interest rates has caused disadvantages for the economy. The current lending interest rate is quite high so the rising mobilisation rate will also hike the lending interest rate, making businesses, especially exporters, face difficulties in borrowing capital. He also recommended depositors not focus too much on interest rates, but need to pay attention to other factors such as bank prestige, quality of services and accompanying utilities. According to the SBV, several credit institutions and branches of foreign banks have adjusted deposit rates in VND quickly in a number of terms or promoted preferential deposit programmes, offering online savings and certificates of deposits with high interest rates. This move has caused many potential risks, affecting the stability and development of the banking system. To ensure the stability of the monetary market, the SBV Governor has required credit institutions to maintain a reasonable and stable deposit interest rate level, which will be suitable with their lending capacity.-VNS/VNA