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In need of raising medium and long term capital, which serves business activities at the end of the year and reduction in the ratio of short term capital given to medium and long term loan according to regulations issued by the State Bank of Vietnam, many banks is raising their deposit interest rates considerably.
Deposit interest rates in banking market is becoming hotter from the first half of August, as many banks have launched a series of mobilization programs with high interests to attract clients. Many banks mobilize their capital in this time by pushing up interest rate, even more than 10% per year, which higher than previous rates.
Many bank leaders explain that raising interest rates is expected to mobilize medium and long term capital, which will satisfy the demands of capital at the end of the year.
In particular, after he decided on raising deposit interest rate, Mr. Nguyen Van Le as General Director of SHB said: “Adjusting the interest rates is to attract customers to give long term deposit, which increases resources to get ample business opportunities the last months of the year”.
Mr. Pham Duy Hieu as Acting General Director of AB Bank has the same opinion. He said that AB Bank would like to create more opportunities for improving customers’ benefits as well as raise more medium and long term capital, serves business activities at the end of the year and reduction in the ratio of short term capital given to medium and long term loan according to regulations issued by the State Bank of Vietnam.
Mr. Can Van Luc as financial and banking expert points out 3 reasons why deposit interest rate has increased considerably in recent days, in particular: the first reason is that medium and long term credit in Vietnam accounts for a high proportion (about 50% of total outstanding loans of banking industry), therefore, the fact that banks raise their interest rate (for medium and long capital) would help banks raise more capital to prosper until the end of the year.
The second reason is to meet capital adequacy ratio required by State Bank. The last reason is to satisfy the regulations of State Bank regarding reduction in the ratio of short term capital given to medium and long term loan. This year, this ratio has been at 40% but it may reduce to 35% and 30%, respectively in 2020 and 2021.
In addition to three reasons above, another reason why banks raise their deposit interest rates considerably is that some enterprises have issued their bonds with interest rates up to 12% or 13% per year. Therefore, raising deposit interest rates is required to improve competitive advantage of banks in capital market.