Banks in Laos |cut kip account rates to boost economy

Conversely, banks have raised the interest rates offered on Thai baht and US dollar deposit accounts hoping to build up reserves of these currencies amidst rising demand for the baht and US dollar.
Banks informed Vientiane Times yesterday that lowering the interest rates on kip accounts and loans was intended to encourage people to spend kip and boost commercial productivity.
The lower interest rate on kip accounts would deter people from depositing money in banks and keep it in circulation, which would also bolster productivity, they explained.
The lower interest rate on loans would encourage entrepreneurs to borrow money from banks for business purposes and generate job opportunities. Prior to this, the interest rates charged on loans were high compared to those in other countries, which hindered the productivity of manufacturers and farmers.
One of the main points to note is that the interest rates offered on accounts that have been in existence for several years is not significantly different to those offered for an account that has been open for just one year. Previously there was a big difference between the one-year and long-term interest rates.
According to BCEL, a savings account now attracts just 1.91 per cent. A 3-month deposit account attracts 3.20 per cent interest, 4.02 per cent is paid for a 6-month deposit, 5.72 per cent for a 12-month deposit, 6.90 per cent for a 36-month deposit, 6.97 per cent for a 48-month deposit, and 7.04 per cent for a 60-month deposit.
Banks also lowered interest rates last year which was viewed as a major change in the banking sector, with the government wanting to lower the interest charged on loans to spur business growth.
At that time, a savings account at BCEL attracted 1.96 per cent interest, a 3-month deposit account attracted 3.34 per cent, 4.22 per cent interest was paid for a 6-month deposit, 6.13 percent for a 12-month deposit, 11.50 per cent for a 36-month deposit, and 12 per cent for a 48-month deposit.
Meanwhile interest rates on Thai baht and US dollar accounts have risen, as these currencies are in high demand in Laos because businesses need them to pay for impor ted goods.
BCEL now offers 1.5 per cent interest on a US dollar savings account and 0.90 per cent for Thai baht, while a 3-month US dollar deposit account attracts 1.65 per cent interest and a 3-month baht deposit account attracts 1.40 per cent interest.
For 6-month deposits, 2.40 per cent (US$) and 2.15 percent (baht) will be paid. For 12 months, the interest paid is 3.40 per cent (US$) and 3.15 (baht); for 36 months, the interest is 5.90 per cent (US$) and 5.65 per cent (baht); and for 60 months, the interest is 6.65 per cent (US$) and 6.40 per cent (baht). Phongsavanh Bank's interest rates are even higher: 6 per cent (US$) and 5.75 per cent (baht) for 12-month deposits, 7 per cent (US$) and 6.75 per cent (baht) for 24-month deposit accounts, and 7.50 per cent (US$) and 7.25 per cent (baht) for 36-month deposit accounts.