SBV to further cut regulatory interest rates on June 19

On June 16, the central bank issued Decision No 1123/QD-NHNN adjusting the refunding interest rate, rediscount interest rate, overnight lending rate in interbank electronic payments, and interest rate for loans to offset capital shortages in clearance between the SBV and credit institutions.

Accordingly, the overnight lending rate for interbank electronic payments and the interest rate for loans to offset capital shortages in clearance between the SBV and credit institutions will be brought down from 5.5% per year to 5% per year, the refunding interest rate from 5% per year to 4.5% per year, and the rediscount interest rate from 3.5% per year to 3% per year.

The SBV also issued Decision No 1124/QD-NHNN, which regulates the maximum interest rates for Vietnam dong (VND) deposits of organisations and individuals at credit institutions.

In particular, the maximum rate for non-term and under-one-month deposits in VND will be kept at 0.5% per year, while the ceiling interest rates for deposits with one-month to under-six-month terms is cut down from 5% per year to 4.75% per year, and for deposits at people’s credit funds and micro-financial institutions - from 5.5% per year to 5.25% per year. Meanwhile, interest rates for deposits of a six-month term or over will be set by credit institutions on the basis of capital supply and demand in the market.

According to another newly issued decision, No 1125/QD-NHNN, the maximum interest rate for short-term loans in VND for some economic sectors will be decreased from 4.5% per year to 4% per year. For loans provided for those sectors by people’s credit funds and micro-financial institutions, the ceiling interest rate will be reduced from 5.5% per year to 5% per year.

The SBV said under the National Assembly’s resolution and the Government and Prime Minister’s directions, it has been governing the monetary policy and banking activities in a firm, proactive, flexible, timely and effective manner, and harmoniously combining the monetary policy with other fiscal and macro-economic policies so as to cool down lending interest rates to support economic recovery and development.

The SBV earlier reduced regulatory interest rates on March 14, March 31, and May 23.

Experts held that the cut will pave the way for interest rates to go down, helping businesses reduce their capital costs and improve their performance while people can spend more on consumption. This will help stimulate economic growth and increase orders placed on businesses./.