Vietnam Money-Dong funds build up as rates rise

HANOI, May 26 (Reuters) - Commercial banks in Vietnam have started building up surplus funds in the Vietnamese dong <VND=> as higher deposit rates lure depositors but are still short of dollar funds, bankers said on Monday.

Last Monday, Vietnamese banks raised interest rates after the central bank removed a 12-percent ceiling on dong deposit rates and raised three other key rates to fight a surge in inflation.

"So far there has been a surplus of working capital at banks," the State Bank of Vietnam, or the central bank, said in a money market review for the week ending last Friday.

The review said state-run and foreign banks had a higher dong fund surplus while joint-stock banks had lower surplus.

Banks offered different ways to boost dong funds, from giving 15 percent per year to working extra hours on Saturday to better serve clients, they said.

As banks pay higher rates on deposits, they have also started raising rates on lending to around 18 percent per year.

On Monday, major lenders raised the rates on overnight dong loans on the interbank markets to 10-13 percent, from 9-11 percent a week ago. They charged the six-month dong loans at between 13-16 percent, up from 10-14 percent a week ago VNIBOR.

Several foreign banks already offered their six-month and 12-month loans at 18 percent.

Last week, the central bank set the base rate for dong deposits and loans at 12 percent and said banks could offer rates of up to 18 percent.