Interest rates for Vietnamese dong savings are rising, so local enterprises are afraid that their borrowing costs will surge as they need loans to fund their goods production plans for the upcoming Lunar New Year holiday (Tet), according to Thanh Nien newspaper.

A bank teller counts Vietnamese banknotes. Businesses have expressed concern over interest rate hike

Commercial banks have entered a race to increase their deposit rates since early last month. On November 20, Saigon-Hanoi Bank (SHB) announced plans to adjust upward its annual deposit rates by 60 basis points. The rates are now 7.8% for 12-month savings of at least VND5 billion and 7.4%-7.6% for tenors of six to 11 months.

Earlier, SHB had hiked the deposit rates by 10 basis points for three- to five-month tenors.

Vietnam Prosperity Joint Stock Commercial Bank has also revised upward deposit rates for some tenors by 10 basis points. For savings of six months or longer, the rates have been raised to more than 7%.

Similarly, the deposit rates at Orient Commercial Bank have also gone up by 10-20 basis points. Its highest rate is now applied for the 36-month tenor, at 7.7%.

At the end of last month, large banks, such as Bank for Foreign Trade of Vietnam, Vietnam Bank for Industry and Trade and Bank for Investment and Development of Vietnam, raised their deposit rates by 10-30 basis points.

In addition, they have rushed to issue bonds with interest rates of more than 7% to raise capital.

The interbank market has also seen interest rates for Vietnamese dong savings rising since early this month. According to the State Bank of Vietnam (SBV), interbank rates are now 4.74%, 5.09%, 5.58% and 5.8% for overnight, one-month, three-month and six-month deposits, respectively.

Bui Quang Tin, a lecturer at Banking University of HCMC, forecast the lending rates would go up by 50 to 100 basis points in the coming period.

Nguyen Huynh Phu Lam, director of Hai Binh Gia Lai Co., Ltd, a cashew nut processor based in the Central Highlands province of Gia Lai, expressed his concern over banks’ lending rate hikes in the coming period as 60% of his company’s operation capital came from bank loans. The company is now subject to an annual interest rate of 9% for its loans, so if the rate is revised upward by 50-100 basis points, the company will have to raise its product prices, Lan added.

According to a survey conducted by the General Statistics Office on the construction sector’s trends last quarter, construction firms’ borrowing costs increased by 0.3% over the previous quarter and accounted for 1.6% of the total costs.

Foreign currency lending likely to be extended until next year

On November 11, the central bank publicized the draft circular amending and supplementing Circular 24/2015 on foreign currency loans, allowing local banks and foreign bank branches to continue making short-term foreign currency loans until March 31 and medium- and long-term foreign currency loans until September 30 next year.

The extension is aimed at meeting enterprises’ capital needs for production and export activities, helping them earn sufficient foreign currency revenue from their export operations to repay loans.

The common foreign currency rates range from 2.8% to 4.7% for short-term loans and from 4.5% to 6% for medium- and long-term loans, according to SBV.

SGT