Vietnam's Central Bank cuts policy rate for third time
The aim is to steer the market towards a downward trend in interest rates in the future by lowering the ceiling on deposit and operating rates.
The State Bank of Vietnam (SBV), the country’s central bank, has announced its decision to cut the policy rates for the third time in 2023, scheduled to take effect on May 25.
|Bank's staff at the BIDV-Hoan Kiem branch changes the lending rates. Photo: Pham Hung/The Hanoi Times|
As a result, overnight loans and rediscounts for interbank electronic payments and loans to cover payment settlement shortfalls between credit institutions and the SBV have been reduced from 6.0% per annum to 5.5% per annum.
The refinancing rate was reduced from 5.5% to 5.0% per annum, while the rediscount rate remained unchanged at 3.5% per annum.
The SBV noted that the maximum interest rate for sight deposits and deposits with a maturity of less than one month would remain at 0.5% per annum. However, the maximum interest rate for deposits with a maturity of up to six months has been reduced from 5.5% to 5.0% per annum.
In special cases, such as deposits in Vietnamese dong (VND) in People's Credit Funds and Microfinance Institutions, the maximum interest rate will be reduced from 6.0% to 5.5% per annum. Credit institutions will set interest rates for deposits with a maturity of six months or more based on market capital supply and demand.
Previously, the State Bank of Vietnam had made two interest rate adjustments in March and April, cutting rates by 0.5-1% per year to support the economy.
The central bank also instructed credit institutions to maintain stable and reasonable deposit rates in line with their capital adequacy, healthy credit expansion, and risk management capacity.
The aim is to ensure that these rates do not disrupt the stability of the money market and market interest rates. In addition, credit institutions are encouraged to reduce costs to stabilize lending rates and support enterprises in their recovery and development of production and business activities.
The SBV suggested that the interest rate level has remained relatively stable, with market rates gradually decreasing in the first month of 2023. Commercial banks' average new deposit interest rate is 6.3% per year, a decrease of 0.18% per year compared to the end of 2022. In addition, the VND lending interest rate at commercial banks is about 9.3% per year, a decrease of 0.65% per year compared to the end of 2022.
The SBV attributes the persistence of high lending interest rates to various factors, such as the economy's heavy reliance on capital supply channels from the banking system and domestic and international pressures on inflation and exchange rates.
Data showed that the credit-to-GDP ratio reached 125.34% at the end of 2022, while the economy's continuous demand for capital has put pressure on lending rates.
The SBV added that Vietnam's significant economic openness, where fluctuations in the financial market and world currencies have a strong and rapid impact on domestic interest rates and exchange rates, remains another key factor influencing interest rates.
- Greening finance accelerates Vietnam's SDG implementation
- DHL Express partners with ACB to cut carbon emissions using sustainable aviation fuel
- Vietnam joins the ASEAN Regional Payment Connectivity
- More than US$240 million transacted one month after corporate bond platform launched
- VinFast begins trading on Nasdaq
- Standard Chartered Vietnam supports young leaders in Sustainability Incubator Program
- Vietnam’s CPI growth set to expand up to 3.7% in 2023
- VDCA publishes guidelines for personal data processors
- Corporate bond trading platform to be new growth driver
- Government to ask for parliament's approval on global minimum tax
Vietnamese PM visits world’s 3rd largest civil aircraft manufacturer
Vietnam news in brief - September 24
Friendly LGBT community destinations in Vietnam
Hanoi Fall Festival 2023 captivates visitors with unique activities
Revising Capital Law opens door to Hanoi's prosperity: Mayor
Global Conference of Young Parliamentarians: Opportunity to promote international cooperation
Global Conference of Young Parliamentarians: Roadmap for better future
The quintessential craft of Ngu Xa bronze casting
Hanoi develops without losing characters