Several banks have raised interest rates for dollar deposits in a bid to consolidate their shares on the mobilization market now that the interest rate for all funds in Vietnam dong has been capped at 14%.

Since late last week, Western Commercial Bank has raised deposit rates for the greenback at between 5% and 5.3% per year, all for short-term savings. Meanwhile, Southeast Asia Commercial Bank has set the highest deposit rate for the dollar at 6% per year.

At other joint-stock banks such as Kien Long Bank, Orient Commercial Bank, Saigon Commercial Bank, and An Binh Bank, the highest dollar deposit rate is between 5.1% and 5.6% per year.

Only big banks having strength in international payment and import export finance like Eximbank, ACB, and Sacombank can keep dollar deposit rates at less than 5% per year.

Bankers said they raised the interest rate to increase mobilization, especially in the run up to Tet when quite a lot of remittances are usually sent to Vietnam which may become a good source of foreign capital for banks.

Furthermore, smaller banks have found the game tougher for them in mobilizing funds in Vietnam dong as all have raised the interest rate to the limit of 14% as agreed upon with the Vietnam Banks Association.

Do Lam Dien, deputy head of corporate banking at Maritime Commercial Bank, noted several banks had to raise dollar rates to attract the greenback to repay depositors as many had earlier made dollar loans to customers.

In addition, the increasing demand for dollar loans is a reason behind the rising dollar rate.

Le Dang Khoa, deputy general director of Western Commercial Bank, said that over the past three months, the difference between lending rates in Vietnam dong and the U.S. dollar had widened, encouraging customers to take out dollar loans.

Khoa said enterprises want to take out short-term dollar loans because the lending rate for dollars was 12 percentage points lower than that in Vietnam dong. For that reason, “many corporations want to borrow the U.S. dollar,” Khoa said.

At this time, the lending rate in the U.S. dollar at banks is around 7%-8% per year, while the lending rate in Vietnam dong is around 18%-19% per year.

Although making loans to importers who do not have dollar incomes pose risks for both lenders and borrowers, many banks are still willing to offer dollar loans for importers.

Experts said the high dollar deposit rate would encourage people to hold on to the greenback. Speaking at a seminar here last month, Le Xuan Nghia, vice chairman of the National Financial Supervisory Commission, said the central bank should put a ceiling on dollar deposits.

Although the central bank has asked banks to limit dollar credits, the total amount of outstanding loans in foreign currencies still grew strongly in 2010.

As of end-2010, the overall credit growth was 27.6% against late 2009, but the growth in dollar credits was 37.7% as against the growth in Vietnam dong credit at 25.3%.