State-owned Vietcombank and Vietinbank, for example, now list one-month deposits at 4.3 per cent and five per cent, which was much lower than the SBV's 5.5-per cent interest rate cap. — Photo VNA

HA NOI (Biz Hub) — Banking experts have recommended that the State Bank of Viet Nam (SBV) remove the interest rate cap regulation as the Vietnamese banking system's liquidity was quite abundant.

Commercial banks have continuously adjusted their deposit interest rates down by 0.2 to 0.5 percentage points, as their liquidity was also quite abundant. State-owned Vietcombank and Vietinbank, for example, now list one-month deposits at 4.3 per cent and five per cent, which was much lower than the SBV's 5.5-per cent interest rate cap.

Other private commercial banks have stopped offering promotion programmes to attract depositors as in previous years.

Nguyen Thu Ha, deputy director of the SBV Monetary Policy Department, also affirmed that credit institutions' liquidity was ensured and profuse while their business performance was stable. The inter-bank market is also stable with interest rates remaining low, she said.

Expert Nguyen Tri Hieu told Dau tu Chung Khoan (Securities Investment) magazine that the SBV should on occasion further cut the deposit interest rate by 0.5 percentage points to five per cent every year before floating the rate.

He explained that if the inflation stayed at 4.5 per cent, the deposit interest rate would remain positive, so depositors would still select banks over other investment channels such as property, securities, foreign currency and gold since these were not attractive enough.

The country's inflation in the first nine months of 2014 stood at 2.08 per cent, the lowest level in the past decade.

Leaders of some joint stock commercial banks likewise confirmed that banking system liquidity was quite profuse while many banks have directly adjusted their rates lower than the SBV cap.

They proposed that the SBV remove the cap and manage it using indirect instead of direct measures such as the cap regulation.

Can Van Luc of the Bank for Investment and Development of Viet Nam suggested that the SBV seriously study the cap's removal, as it was obvious that the cap currently made a modest impact on the currency market.

The time is ripe to float the rate, Luc said, adding that the currency market was currently stable with abundant liquidity. Administrative measures are only temporary and should be taken only when the currency market is volatile, he pointed out.

However, Luc explained, the SBV should still apply a lending interest rate cap for the Government's priority sectors such as agriculture, exports, support industries, small and medium enterprises and hi-tech businesses. He also urged the SBV to further speed up the restructuring of remaining ailing banks to avoid unfair competition in attracting depositors. — VNS