Banks banned from offering deposit rates over 14%
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Local credit institutions are not permitted to offer deposit interest rates above 14 percent per annum, including promotions and bonuses, according to a recent decree from the central bank.
The interest rate cap is applied for dong deposits, certificates of deposits (CDs), promissory notes, bill exchanges and bonds, said Decree 02/2011/TT-NHNN released Thursday.
The only exception is municipal people’s credit funds which could raise dong deposits at 14.5 percent.
These caps are applied for end-term interest payments.
The central bank’s move came after some local lenders breached the interest rate cap of 14 percent, offering rates of up to 17-18 percent by granting bonus interest rates and promotions, which may cause new chaotic situation in the monetary market as was the case in December last year.
Last December, Techcombank sparked off an interest rate war by hiking deposit interest to 17 percent. But the central bank stepped in a day later and called halt by setting a cap.
The central bank would strictly penalize the cap rate violation, said the Governor Nguyen Van Giau in a press conference Tuesday.
