Vietnam raises dollar deposit rate caps
HANOI - Vietnam's central bank said it will raise the interest rate ceiling on dollar deposits that banks can offer institutional customers by between 0.2 and 0.5 of a percentage point.
The rise in the rate, used by the central bank to prevent the dollarisation of Vietnam's economy, or the use of the dollar rather than the Vietnamese dong, is the second this year.
A central bank directive seen by Reuters on Monday said the rate ceiling for deposits of more than six months would be raised to 1.5 percent from 1 percent while that for deposits of up to six months would be 1.2 percent, up from 0.7 percent.
The rate on dollar deposits with no fixed terms will be increased to 0.5 percent from 0.3 percent.
"The decision will benefit only companies," said a dealer at a foreign bank branch in Hanoi.
The new rates come into effect in 15 days after the directive is published by the Official Gazette, deputy central bank governor Nguyen Dong Tien said in the directive signed on Friday. The effective date could thus be in September.
Vietnamese banks, including key state-run banks, have been raising rates on dollar deposits following a rate rise by the U.S. Federal Reserve on Aug. 9.
The latest to do so was Asia Commercial Bank, the second-largest of Vietnam's semi-private banks, which increased dollar deposit rates for individuals by 0.3 of a percentage point from Aug. 18.
Central bank governor Le Duc Thuy told state-run Voice of Vietnam radio on Monday that rate increases by commercial banks would help reduce unnecessary demand as businesses would have to consider a loan more carefully.
Thuy also said that while it would be tough for Vietnam to keep annual inflation down to its 6.5 percent target this year due to rising oil prices, the country could miss its growth target too.
A central bank official has forecast inflation this year would be between 7.5 percent and 8 percent.
Vietnam's GDP was 7.63 percent bigger in the first half of this year than the first six months of 2004 and the government has ordered all agencies to strive for growth of 9.3 percent in the second half in an attempt to reach the full-year target.
The central bank would not do anything to tighten the monetary policy this year to ensure stable credit growth of 25 percent, similar to last year, Thuy said.
Reuters - August 29, 2005.
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