Many Vietnamese commercial banks continue to flout the State Bank of Vietnam’s deposit interest rate cap of 14%

The cap is intended to improve the banking sector’s liquidity, said Dr. Le Xuan Nghia, Vice Chairman of the National Financial Supervisory Committee at a forum on prospects for the Vietnamese economy in 2012-2013 held on January 9.

Nghia added if banking liquidity problems are not dealt with, it will prove a challenge for banks to lower lending rates to ease difficulties for the property sector which has seen bad debts burgeon.

Improved liquidity will remain a matter of concern for the banking sector for at least the first half or even the whole of 2012, he said, noting that banks are likely to offer high deposit interest rates to attract customers.

According to the official, the measure should help in pumping more money into the market and increasing the compulsory reserve rate. The long term need is to focus on dealing with the bad debts accumulated by banks.

Tran Bac Ha, Chairman of the Bank for Investment and Development of Vietnam (BIDV), was cited by VietnamNet as saying that the violation of deposit interest rate cap had become apparent since early last December.

Ha disclosed that, some days ago, a customer had brought some VND16 billion (USD761,904) to deposit at his bank, while asking for the interest rate of 15%. However, the bank refused and the customer had turned to another bank.

Experts worry that if the liquidity is not improved, it will be very difficult for Vietnam to lower deposit rates to 12% in early 2012.