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Banks raise gold rates to attract deposits   2009-09-13 - VietNamNet

Many commercial banks have raised interest rates on gold deposits as domestic prices of the metal continue to soar and depositors withdraw gold to sell.

The Sai Gon Commercial Joint Stock Bank (SCB) has hiked its deposit interest rate by 0.55 to 0.6 per cent to offer 4.55 per cent a year for terms up to 12 months and 4.6 per cent for longer terms.

The Sai Gon Thuong Tin Joint Stock Bank (Sacombank) pays 4.54 per cent a year for 36 months to depositors who deposit 300-500 taels of gold.

The SCB said it was raising rates to mobilise gold in preparation for the usual spike in demand for gold loans at the end of the year.

Nguyen Le Dieu Tho, SCB deputy general director, said mobilisation had increased sharply since deposit rates were raised. But most other banks admitted to increasing the rate because a number of depositors were withdrawing their gold to sell to take advantage of the recent price hikes.

Few gold borrowers

Truong Dinh Long, deputy general director of Orient Commercial Bank, said depositors tended to withdraw their gold when the metal’s price increased and deposit again when the price went down.

Tran Phuong Binh, general director of Dong A Bank, said customers, fearing a further rise in gold prices, preferred borrowing money to gold, even property investors who usually had a huge demand for gold.

Banks said most gold borrowers were jewellers and investors at gold trading floors.

Gold shops borrow from banks and sell the gold at high prices. They later buy gold when the prices are down to repay the banks.

Some people think there will be a race among banks to increase interest rates on gold deposits.

But analysts say this is unlikely since not all banks would dare to mobilise gold paying high interest rates, but only those with a strong background in gold trading and having sales outlets.

Besides, the current volatility in the price of the precious metal could cause risks for the banks if they do not manage it well, they point out.

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