State Bank further reduces interest rate

The interest rate for deposits in dong for a term of one month or more will be cut from 12 to 11 per cent per year from next Monday, May 28, as per a State Bank of Vietnam directive issued yesterday, May 25.

Previously, the ceiling deposit interest rate was constantly going down in 2011 and for the first three months in 2012. Before the new rate was announced yesterday, interest rates had been cut down three times since March this year.

This will now lead to a reduction in the ceiling lending interest rate that will be slashed from 15 to 14 per cent per year on the same day. This rate is applied to four priority economic sectors including exports, agriculture, rural areas and small and medium sized enterprises.

The State Bank used interest rates as management tools to adjust refinancing rate from 13 to 12 per cent; discount rate from 11 to 10 per cent; and the inter-bank electronic payment rate from 14 to 13 per cent.

The Governor of State Bank said the interest rate reduction is aimed to help solve difficulties for production and business activities in accordance with a directive from the Prime Minister.

Recent economic improvement, notably the easing of inflationary pressure facilitated the decision. For instance, the consumer price index (CPI) edged up 0.18 per cent in May and increasing 2.87 per cent in the first five months of this year, assuring bank liquidity and a stabilised monetary market.

The central bank noted that although interest rates had gradually declined, their slow progress together with rising credit risks still significantly challenged businesses in the face of falling purchasing power and increased inventories.

Source SGGP, Translated by MT

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