Interest rate proves to be the bottom line

Friday, May 16, 2008
The interest rate proves to be the most important consideration for depositors when they are thinking about where to make deposits, a quick survey, conducted by Thoi bao Kinh te Vietnam, has found.

Depositors have become more realistic nowadays, the survey concluded. Most depositors said they will make deposits at banks that offer the highest interest rates.

This is really a noteworthy conclusion, because depositors would have said they chose to deposit at state owned banks if the same question had been raised several years ago.

The survey was conducted within one month, attracting 6,000 readers.

Interest rate No 1

45.41% of 6,160 readers said that the interest rate is the most important factor in their decisions about where to deposit money.

Local newspapers reported a case in which a resident in a district in the central province of Ha Tinh, where there are only state owned banks offering low interest rates, decided to remit the money he had to a relative in Hanoi, so that the relative could deposit it at a joint stock bank to enjoy higher interest rates.

This being the case, the raising of interest rates is the No 1 weapon of banks in the competition with colleagues to mobilise capital. In late February 2008, a joint stock bank reported that it could mobilise VND120bil worth of capital a day when it raised deposit interest rates, three times more than on ordinary days.

Prestige important factor

32.6% of readers said that the prestige of banks was the most important factor. The high percentage shows that many people are still very cautious about their assets, though banks’ operations are supervised and protected by state management agencies.

Prestige proves to be a real asset of banks. State owned banks are considered prestigious as they have had a long period of operation. Moreover, people believe that the state will rescue the state owned banks if they have problems.

An example has been cited to explain why prestige remains the second most important factor for depositors.

In the latest interest rate race in February, Military Bank did not offer sharp and continuous interest rate increases like other banks, but it still attained its targeted volume of mobilised capital.

The bank interviewed its clients on why they still made deposits at the bank though the bank did not offer interest rates that were as attractive as other banks. Most of the clients answered that the fact that Military Bank did not raise interest rates bolstered their confidence. They thought that the bank was operating well and thus did not need to raise its interest rates. Meanwhile, they thought that other banks tried to raise interest rates because they seriously lacked capital, or had problems in operation.

Doubts raised about promotion programmes

It is quite a surprise that promotion programmes do not have much of an impact on depositors’ decisions. Only 1.54% of depositors said that they would deposit at banks to enjoy the preferences of promotion programmes.

The result, once again, shows that depositors have become more realistic.

Additionally, the low attractiveness of promotion programmes can be explained by the fact that too many programmes have been launched recently. Preliminary statistics show that at least 20 such programmes are currently running. (TBKTVN)