Vietnam: Inflation rate rises, new interest rates set

Some commercial banks have raised deposit interest rates following an 8-year inflation rate high in February. Analysts believe a new interest rate floor will be set in the second quarter.

Techcombank and VPBank’s moves of raising deposit interest rates in early March have been followed by a series of other banks.

Agribank and Vietcombank, two of the ‘big four’ banks, both raised the interest rate by 0.3 percent for six-month term deposits, and raised the interest rates by 0.7 percent and 0.9 percent, respectively, for 12-month term deposit.

At Sai Gon Commercial Bank, the interest rates of less-than-6-month deposits have been raised to 3.95 percent, just 0.05 percent lower than the ceiling rate. The rates are 5.7 percent for six-month and 6.8 percent for 12-month deposits.

The highest deposit interest rate is now offered by Viet A Bank, at 7.1 percent, applied to 15-month and 36-month deposits. Meanwhile, the bank offers 6.1 percent for 6-9-month deposits.

These are the officially quoted interest rates. In fact, banks may pay higher to loyal depositors or clients with large amounts of deposit. Meanwhile, online depositing can get 0.1-0.5 percent more than depositing at the counter.

Analysts believe that commercial banks have to adjust their interest rates because of the high CPI increase in February.

The General Statistics Office reported that the CPI in February 2021 increased by 1.52 percent over January and 1.58 percent compared with December 2020. If they keep the interest rates low, they won’t be able to attract idle money from the public to provide to the economy, which is in recovery.

Opinions still vary about a new interest rate. While some analysts believe that the raising interest rates would trigger a new interest rate increase wave, others say it’s too early to know.

The CPI rose sharply in February, but the CPI of the first two months of the year was still 0.14 percent lower than the same period last year. Therefore, the interest rate hike won’t occur on a large scale, especially when market liquidity is strong and credit demand is still not high.

Interest rates have moved up recently, but they are still low. The highest interest rate for a 12-month deposit is 6.9 percent per annum, offered by some small banks. Some other banks have slashed their interest rates.

However, most institutions have predicted that a new interest rate floor would be set in the second quarter. Can Van Luc, a respected banking expert, has predicted an upward trend for the CPI in March. 

Tran Thuy