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Saturday, June 3, 2023

Central bank cuts interest rates further in easing cycle

The Saigon Times

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HCMC – The State Bank of Vietnam (SBV) has announced two separate decisions further lowering key interest rates, with effect from Thursday, May 25. This is the third rate reduction since March in the central bank’s monetary easing cycle aimed at boosting slackening economic activity and consumption.

According to the SBV’s Decision No. 950/QD-NHNN, the interest rates for overnight interbank electronic payments and compensatory lending for capital shortfall in offset payments by the central bank to commercial banks will fall from 6% to 5.5% per year.

This decision stipulates the refinancing interest rate will be down from 5.5% to 5.0% per year while the rediscount interest rate is unchanged at 3.5% per year.

Meanwhile, the SBV’s Decision No. 951/QD-NHNN sets the maximum interest rate for Vietnamese dong deposits of organizations and individuals at commercial banks as stipulated in Circular No. 07/2014/TT-NHNN dated March 17, 2014.

Accordingly, the maximum interest rate of non-term and term deposits with tenors of less than one month is unchanged at 0.5% per year. The maximum interest rate of deposits with terms ranging from one month to less than six months will drop from 5.5% to 5.0% per year.

However, the maximum interest rate of VND deposits at the People’s Credit Funds and microfinance institutions will be cut from 6.0% to 5.5%. The interest rate of deposits with terms of six months or longer will be determined by commercial banks based on supply and demand on the market.

The central bank’s latest interest rate cut is designed to fuel economic growth, support liquidity in the interbank market, and make borrowing and lending easier in the banking system, thus encouraging investment and consumption.

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