Banks raise interest rates to boost deposits
Banks raise interest rates to boost deposits
Commercial banks in Laos are raising deposit interest rates as part of efforts to mobilise funds so they can provide more loans to customers.
The average deposit rate offered by commercial banks is now 9.1 percent per year for Lao kip accounts, increasing from 8.72 percent in 2013.
This is one of the main indicators they want to encourage depositors so they can increase their lending to customers amid growing demand for loans.
The deposit interest rate for US dollar and Thai baht accounts also increased from 3.64 percent to 3.96 percent and 3.61 to 4.42 percent respectively.
The government is encouraging commercial banks in Laos to provide loans to businesses so as they can expand their businesses, creating jobs and income for Lao people.
As part of efforts to attract more businesspeople to borrow money to expand their businesses, the banks have lowered lending interest rates.
At present, the average lending interest rate for Lao kip offered by the banks is 13.48 percent per annum, dropping from 12.93 percent and from 8.54 percent to 8.44 percent for US dollar loans.
The lending interest rate for Thai baht has remained unchanged at 9.32 percent per annum.
The fact is commercial banks in Laos still have opportunities to lower their lending interest rates further as deposit to lending interest rate margins are still big. Increasing competition among commercial banks in Laos will force them to lower their interest rates.
Many foreign banks, in particular from Thailand, have recognised the opportunity to provide loans in Laos due to the current lending rate being higher compared to other countries.
Kungsri, one of the major banks in Thailand, have begun to provide loans for people to purchase consumer goods after seeing the high interest rates in the country.
An economist, Dr Mana Southichak told Vientiane Times recently that the lending interest rate would continue to fall due to an inflow of foreign banks into the country.
Economists who produced the Lao Economic Outlook 2013, which was released earlier this month, say that the commercial banks' policy to mobilise funds and increase lending to businesses would be good for Lao economic development.
They said that Laos needs more funds to boost socio- economic development so the country can achieve the millennium development goals in 2015 and create concrete foundations for the country to graduate from the UN list of least developed nations.
One of the major concerns is that increasing loan values would pose challenges for the ban ks in maintaining a low level of non-performing loans. According to the Bank of the Lao PDR, non performing loans are still at an acceptable level.
vientiane times
