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With the new decision, the compulsory reserve ratio for demand deposits and the fixed term less-than-12-month deposits is 8 percent from September 1, instead of 7 percent as previously applied. Meanwhile, the six percent compulsory reserve ratio will be applied for the deposits with the term of 12 months of more.
However, the required ratios are lower for Agribank, which serves the rural development, the Central People’s Credit Fund, and cooperative banks, 7 percent and 5 percent, respectively.
Ha Van Tham, Chair of Ocean Bank, said that the higher required compulsory reserve ratio would make the banks’ costs for foreign currency capital increase, which will force bankers to push the lending interest rates up to cover the expenses. As a result, the foreign currency loans would be less attractive in the eyes of borrowers.
According to an executive of Vietbank, the dong lending interest rates now hover around 21-22 percent per annum, while the foreign currency lending interest rates are between seven and eight percent. The big gap of 12 percent between the dong and the dollar interest rates has prompted businesses to borrow in dollars instead of dong.
Statistics show that the gap between the mobilized capital in dong and in dollar in July reached 150 trillion dong, or 7.3 billion dollars (460 trillion dong in deposits and 610 trillion dong in loans). Experts have warned that if the situation cannot be improved, this may lead to the risk in foreign currency liquidity.
The State Bank has vowed to slash the dong interest rates, while commercial banks have taken necessary measures to fulfill the central bank’s instruction.
Meanwhile, if the foreign currency interest rates go up as expected, the gap between the dong and the dollar interest rates would be narrowed, which will make the goal targeted by the State Bank attainable. If so, businesses would rather borrow money in dong instead of dollars, because they would be able to enjoy reasonable dong interest rates, while the dong/dollar exchange rate would not be a worry for them any longer.
Agreeing with Tham, Pham Quyet Thang, General Director of GP Bank, said that the capital costs of banks would increase as a result of the decision by the central bank. Therefore, bankers would have to consider thoroughly with their credit development plans. They will either have to slash the deposit interest rates, or raise the lending interest rates.
Thang does not think that bankers would follow the former way, because the dollar deposit interest rates are very low already, and if they lower the rates further, they would not be able to attract dollar depositors.
It is more possible that banks would raise the foreign currency lending interest rates to cover the higher expenses
Tham, like many other bankers, believe that raising the compulsory reserve ratio should be seen as a wise move in the current circumstances. They said that it is necessary to stop the high growth rate of foreign currency credit, because this would put a hard pressure on the exchange rate, the stability of the monetary market and the foreign currency market, especially when dollar loans become due.
However, some bankers think that the one percent increase in the required compulsory reserve ratio proves to be modest which would not help settle the current problem.
An expert said that the gap in the basic inflation between the US and Vietnam is 8 percent, therefore, the gap between the dong and the US interest rate should be 8 percent only. In other words, if the dong interest rate keeps at the current levels, the dollar lending interest rate should be at 10 percent.
This means that if the central bank aims to restrict dollar loans, it should raise the compulsory reserve ratio to 10 percent.
TBKTVN
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