Decision No. 2411/QĐ-NHNN sets the maximum interest rate for Vietnamese đồng-denominated deposits with terms from one month to less than six months is 4.75 per cent per year. — Photo cafef.vn

HÀ NỘI — The State Bank of Vietnam (SBV) has issued two new decisions on deposit interest rates, effectively from November 20 this year.

Under one, the interest rate applied for US dollar-denominated deposits of organisations and individuals at credit institutions and foreign bank branches is zero per cent per year.

The other holds that the maximum interest rate for Vietnamese đồng-denominated deposits with terms of less than one month of organisations and individuals at credit institutions and foreign bank branches is 0.5 per cent per year. Additionally the maximum interest rate applied to deposits with terms from one month to less than six months is 4.75 per cent per year.

According to the SBV, the two decisions aim to ensure consistency on a legal basis with other issued circulars on deposit interest rates.

At people's credit funds and microfinance institutions, the maximum interest rate for đồng-denominated deposits with terms from one month to less than six months is 5.25 per cent per year.

For deposits with terms of more than six months, the interest rated are determined by credit institutions and foreign bank branches based on the supply and demand of capital in the market.

Currently, some banks are listing interest rates for deposits with term of 12 months or more from 6 per cent to 6.3 per cent per year, such as ABBank (6.2-6.3 per cent per year), IVB (6.1-6.3 per cent per year), Bắc Á Bank (6.15 per cent per year), Đông Á Bank, OceanBank, SHB and HDBank (6.1 per cent per year) and Việt Á Bank, Bảo Việt Bank and BVBank (6 per cent per year).

According to statistics, eight banks have increased deposit interest rates since the beginning of this month, including IVB, Việt Á Bank, VIB, MB, Agribank, Techcombank, ABBank and VietBank.

SBV’s reports show that the rising rate of credit has been much higher than that of deposits. While credit surged by 10.08 per cent in the first ten months of this year, deposits increased by only 4.79 per cent.

The large gap between the credit and deposit growth has created a liquidity pressure for the banking system. The deposit interest rate is also greatly affected by the gap. When credit growth is significantly higher than that of capital raising, the deposit interest rate will tend to increase to attract more deposits to have enough capital for lending. Therefore, it is highly likely that the interest rate level will move sideways and in an upward trend in the near future.

According to experts, to increase the capital source, banks are also increasing the issuance of bonds to meet the SBV’s regulation on short-term capital for medium and long-term loans. Though the bond issuance has also contributed to supplementing lending capital, but in the long term, deposits remain the major capital source. — VNS