RPT-Vietnam scraps dong deposit rate cap

(Repeats story first carried on Saturday without any changes)

By Ho Binh Minh

HANOI, May 17 (Reuters) - Vietnam's central bank said on Saturday it has abolished the 12-percent ceiling rate on dong deposits and allowed banks to set their own rates from next week to help increase liquidity.

The State Bank of Vietnam, the country's central bank, said it introduced a base rate at 12 percent to be applied for both deposits and lending as from May 19, from a base rate of 8.75 percent now applied only for dong loans.

As of next Monday banks can fix on their own the rates on dong deposits and lending, provided their rates would not be 150 percent above a base rate announced monthly by the central bank, it said in a statement seen by Reuters.

"With a base rate of 12 percent per year, the maximum lending by banks will be 18 percent, relatively suitable with the level of market rates and which would not cause major changes on the credit and money markets," the statement said.

Banks have now been offering lending rates of between 15-18 percent per year, the central bank said.

In February the central bank capped the dong deposit rate at 12 percent after banks sparked a heated competition to secure dong funds by offering rates of nearly 14 percent, prompting a shift in deposits from banks with lower rates.

Banks competed in securing funds because a week-long holiday in early February boosted demand for cash while the central bank was tightening monetary policy to offset double-digit inflation.