Vietnam Central Bank Cuts Key Rates by 1pct Today, Second Move in a Month

12-Apr-2012 Intellasia | Stox Plus | 7:01 AM Print This Post

The State Bank of Vietnam (SBV) announced to adjust down benchmark interest rates and deposit rate caps by another 1 percent from April 11, the second rate cut within only one month, the central bank said in a statement released late Tuesday.

The move came out after the official data showed that the local economy has expanded only 4 percent in Q1/2012, the slowest pace in three recent years [+5.84 percent in Q1/2010 and +5.57 percent in Q1/2011]. Experts warned that the country may not achieve the targeted economic growth of 6 percent for this year.

Specifically, the central bank will slash the refinancing rate, a key interbank lending rate, to 13 percent p.a. from current 14 percent p.a. and lower the deposit interest rate cap by 1 percent to 12 percent p.a.

Accordingly, refinancing rate will be cut to 13 percent p.a. from current 14 percent p.a. and discount rate to 11 percent p.a. from current 12 percent p.a., electronic interbank rate to 14 percent p.a. from current 15 percent p.a.

The dong deposit interest rate cap from 1-month terms by 1 percent to 12 percent per annum and rate cap on demand and under 1-month deposits is capped at 4 percent p.a. from current 5 percent.

The SBV also reduces the rate cap from 1-month deposits at grass-root People’s Credit Funds from 13.5 percent p.a. to 12.5 percent p.a.

In case of favourable monetary conditions, the central bank plans to further decrease the policy rates by 1 percent every quarter, expecting the deposit rate cap to ease to 10 percent by the end of the year.

Ho Chi Minh Securities Corp. commented in a report late yesterday that although the rate cut was quite surprising, the firm believed that the move is needed to trim down banks’ funding costs and then lending interest rates to boost credit growth, which has seen much contraction in the first quarter of the year.

Total outstanding loans of the whole banking system as of March 20, 2012 were estimated to ease 2.13 percent from the end of 2011. The country targets to limit credit growth at 15-17 2012.

Last year, interest rates were raised by as much as 6 percent as the country was struggling to battle Asia’s highest inflation, resulting from “too hot” credit growth and inefficient investments by state-owned enterprises.


Category: Finance

Print This Post

Comments are closed.

='st_email' st_title='Vietnam Central Bank Cuts Kegation clearfix">