The deposit interest rate at some commercial banks has significantly exceeded the State Bank of Vietnam's cap and has hit 19 percent per year.
While banks are officially quoting the same 14 percent interest rate for dong deposits, credit officials have been offering depositors between 16-19 percent per year.
Some market watchers said the central bank should remove the deposit interest rate cap of 14 percent because banks are ignoring it.
However, Le Xuan Nghia, deputy head of the National Financial Supervisory Council, said: "A cap removal must be done at the proper time, at least when the inflationary pressure comes down."
Nghia advised the State Bank of Vietnam not to focus on capping deposits or lending interest rates. He said it should instead manage the interbank interest rate, which should be much the same as the Open Market Operation (OMO) interest rate (repo interest rate).
"These measures will help the central bank regulate the market interest rate," Nghia said.
Meanwhile, the State Bank of Vietnam has been tightening its monetary policy to combat inflation. The country's broadest measure of the total money supply edged down 0.72 percent, but was up 0.98 percent against the figure for the end of 2010. Cash in circulation is estimated to have risen 1.45 percent this month and 4.12 percent against the end of 2010.
Meanwhile, economists are targeting credit growth of about 20 percent and a money supply of 15-16 percent at the end of this year.
Given the high deposit interest rate on the market, some banks have been trying to get capital on the interbank market and the OMO, pushing the repo interest rate on May 17 up to 15 percent – the highest level since late in April, while the interbank interest rate is now more than 20 percent on one-month loans.
Cao Sy Kiem, chairman of the Association of Small and Medium-Sized Enterprises (SMEs), said: "The interbank interest rate for weekly or monthly loans has not declined at all."
To help the banking system increase dong liquidity, the central bank has bought 1 billion USD from financial companies in the past month.
"The SBV will gradually buy the dollar to ensure the dollar exchange rate remains stable, while withdrawing dong on the OMO at the same time to prevent too much dong liquidity," Thang Long Securities reported.
Vietnam 's forex reserves were estimated at 12.4 billion USD, worth 1.9 months of imports, according to the Asian Development Bank's Outlook in March. The SBV has been advised to buy 6.6 billion USD worth of dollar to reach a safe level of forex reserves, equivalent to 12 weeks of imports./.
While banks are officially quoting the same 14 percent interest rate for dong deposits, credit officials have been offering depositors between 16-19 percent per year.
Some market watchers said the central bank should remove the deposit interest rate cap of 14 percent because banks are ignoring it.
However, Le Xuan Nghia, deputy head of the National Financial Supervisory Council, said: "A cap removal must be done at the proper time, at least when the inflationary pressure comes down."
Nghia advised the State Bank of Vietnam not to focus on capping deposits or lending interest rates. He said it should instead manage the interbank interest rate, which should be much the same as the Open Market Operation (OMO) interest rate (repo interest rate).
"These measures will help the central bank regulate the market interest rate," Nghia said.
Meanwhile, the State Bank of Vietnam has been tightening its monetary policy to combat inflation. The country's broadest measure of the total money supply edged down 0.72 percent, but was up 0.98 percent against the figure for the end of 2010. Cash in circulation is estimated to have risen 1.45 percent this month and 4.12 percent against the end of 2010.
Meanwhile, economists are targeting credit growth of about 20 percent and a money supply of 15-16 percent at the end of this year.
Given the high deposit interest rate on the market, some banks have been trying to get capital on the interbank market and the OMO, pushing the repo interest rate on May 17 up to 15 percent – the highest level since late in April, while the interbank interest rate is now more than 20 percent on one-month loans.
Cao Sy Kiem, chairman of the Association of Small and Medium-Sized Enterprises (SMEs), said: "The interbank interest rate for weekly or monthly loans has not declined at all."
To help the banking system increase dong liquidity, the central bank has bought 1 billion USD from financial companies in the past month.
"The SBV will gradually buy the dollar to ensure the dollar exchange rate remains stable, while withdrawing dong on the OMO at the same time to prevent too much dong liquidity," Thang Long Securities reported.
Vietnam 's forex reserves were estimated at 12.4 billion USD, worth 1.9 months of imports, according to the Asian Development Bank's Outlook in March. The SBV has been advised to buy 6.6 billion USD worth of dollar to reach a safe level of forex reserves, equivalent to 12 weeks of imports./.
