The National Financial Supervisory Committee has suggested a further cut in the deposit interest-rate cap to 7 percent to bring down lending rates to around 10 percent.
"We now have enough conditions to further slash both lending and deposit interest rates," said the committee’s chairman Vu Viet Ngoan.
He said if the deposit interest-rate cap was reduced to 7 percent, it will not affect the banking sector's liquidity since depositors will continue to have a positive real interest rate.
Ngoan added that the move will also not affect the foreign-exchange rate as the country's foreign-currency reserves are now big enough to intervene in the foreign-exchange market.
"In addition, a further cut in the lending interest rate will not sway the banking sector's business results because the gap between the deposit and lending interest rates is still rather large," Ngoan said.
He noted that the Consumer Price Index (CPI) in the first four months of the year increased by 2.41 percent, the lowest level in four years.
Meanwhile, demand-pull inflation and cost-push inflation are weak as the country's aggregate demand is low and the price of raw materials has not increased.
This means that the year's inflation rate will be around 4.5 and 5 percent, according to Ngoan.
With such an inflation rate, the deposit interest rate could be further cut while still ensuring a positive real interest rate for depositors, he said.
"When the deposit interest rate falls, we will be able to reduce the lending interest rate to 10 percent per year, and even to a lower level in some prioritised sectors such as agriculture, rural areas and production activities for export," he added.
Meanwhile, according to a recent report issued by the committee in April, production activities at domestic enterprises were still sluggish because of high input costs, slow consumption and high inventory. Current interest rates are still too high for local businesses.
With such a tough economic climate for the business community, the committee said the lending interest rate should be cut to 9 or 10 percent per year so that companies could take out loans and increase their production activities.
In addition to interest-rate reduction, the committee also proposed several measures to help the country achieve a Gross Domestic Product (GDP) growth rate of 5.5 percent this year.
The committee said that bad debts need to be settled and more preferential credit packages should be given to companies in the construction and real estate sectors.
As for fiscal policy, the committee said it will accelerate the disbursement of development investments to improve aggregate demand.
Investment priority should be given to projects that are due to be finished this year, the committee said.-VNA
"We now have enough conditions to further slash both lending and deposit interest rates," said the committee’s chairman Vu Viet Ngoan.
He said if the deposit interest-rate cap was reduced to 7 percent, it will not affect the banking sector's liquidity since depositors will continue to have a positive real interest rate.
Ngoan added that the move will also not affect the foreign-exchange rate as the country's foreign-currency reserves are now big enough to intervene in the foreign-exchange market.
"In addition, a further cut in the lending interest rate will not sway the banking sector's business results because the gap between the deposit and lending interest rates is still rather large," Ngoan said.
He noted that the Consumer Price Index (CPI) in the first four months of the year increased by 2.41 percent, the lowest level in four years.
Meanwhile, demand-pull inflation and cost-push inflation are weak as the country's aggregate demand is low and the price of raw materials has not increased.
This means that the year's inflation rate will be around 4.5 and 5 percent, according to Ngoan.
With such an inflation rate, the deposit interest rate could be further cut while still ensuring a positive real interest rate for depositors, he said.
"When the deposit interest rate falls, we will be able to reduce the lending interest rate to 10 percent per year, and even to a lower level in some prioritised sectors such as agriculture, rural areas and production activities for export," he added.
Meanwhile, according to a recent report issued by the committee in April, production activities at domestic enterprises were still sluggish because of high input costs, slow consumption and high inventory. Current interest rates are still too high for local businesses.
With such a tough economic climate for the business community, the committee said the lending interest rate should be cut to 9 or 10 percent per year so that companies could take out loans and increase their production activities.
In addition to interest-rate reduction, the committee also proposed several measures to help the country achieve a Gross Domestic Product (GDP) growth rate of 5.5 percent this year.
The committee said that bad debts need to be settled and more preferential credit packages should be given to companies in the construction and real estate sectors.
As for fiscal policy, the committee said it will accelerate the disbursement of development investments to improve aggregate demand.
Investment priority should be given to projects that are due to be finished this year, the committee said.-VNA
