The State Bank of Viet Nam (SBV) has decided to cut interest rates used as management tools by 1 percentage point. The change, Deputy Governor Nguyen Dong Tien said, would take effect next Monday.
He told a press conference at the SBV headquarters yesterday that the bank had revised the refinancing rate to 7 per cent, the discount rate to 5 per cent, and the overnight lending rate in inter-bank electronic payments to 8 per cent.
The maximum lending interest rate for short-term loans from credit institutions was also adjusted down 1 percentage point to 10 per cent per year.
Tien said that developments in the economy and the monetary market during the first four months of this year had enabled the changes which were necessary to assisting production and business activities, supporting the market and solving bad debts.
Positive conditions included low inflation, improved liquidity in the banking system, stable monetary markets and exchange rates, declining deposit and lending interest rates, and increasing national foreign exchange reserves. But production and business activities still faced many difficulties due to low purchasing power and limited firms' capacity to absorb bank loans.
"We believe that this adjustment will support Government targets although economic conditions and external factors will continue to have impacts on operational policies in the coming months," he said.
"This move by the State Bank sends a clear message about monetary policies. It will create conditions for commercial banks to reduce lending rates," said Vietcombank deputy general director Pham Quang Dung.
"Deposit rates have fallen recently and lending rate cuts are needed, although the revision will take a certain time," said BIDV general director Phan Duc Tu.
From Monday, Vietcombank and Agribank would reduce lending interest rates to below 13 per cent for all existing loans which were subject to rates of over 13 per cent, the banks' representatives said at yesterday's meeting.
Tien said that credit institutions had actively revised interest rates since the central bank asked them to lower lending rates to below 15 per cent last July. Loans with rates of over 15 per cent now accounted for about 14 per cent of all lendings.
"We will guide banks to cut these rates further to 13 per cent. Credit institutions support this policy and it is necessary for the economy," he said.
Vietinbank deputy general director Le Duc Tho said that besides banks' efforts, the Government should continue to take measures to boost purchasing power and exports, heat up the property market and solve bad debts.
Asked if the ceiling deposit rate would be adjusted or removed any time soon, SBV Monetary Policy Department director Nguyen Thi Hong said that the current 7.5-per-cent cap was suitable with inflation, depositors' interests and the market situation.
"Banking system liquidity has improved but some lending institutions are still showing instabilities," she said.
"The cap should be maintained to keep the market stable and avoid having an adverse affect on the declining interest rate trend, which has taken a lot of efforts to achieve," she stressed.