The interest rate that Vietnamese banks charge each other for under-12 month term loans in dong and US dollars dropped last week by up to 1.17 percentage points.

The change came amid a redundancy of cash in the banking system and at a time where finding a sound borrower is still challenging.

The State Bank of Vietnam's report, released on September 26, showed that loan terms for both dong and the greenback were mostly overnight and one week, totalling 64.98 trillion VND (3.26 billion USD) and 30.1 trillion VND (1.4 billion USD), respectively.

The overnight rate for the dong was 2.42 percent, one-to-three week loans for 2.84-3.82 percent, one-to-six month loans for 4.17-6.34 percent and 8.72 percent for 12 months.

Loans in US dollars were charged 0.19 percent for an overnight term, 0.37-0.27 percent for one to three weeks, 0.44-1.59 percent for one to six months, and 2.8 percent for 12 months.

Interest rates that banks can charge their customers have also been slashed to 7-11.5 percent, 3-5 percentage points against last month, to stimulate businesses and achieve low and stable inflation.

However, outstanding loans of the system are not expected to grow because of the current economic turmoil.

While large companies can access credit easily despite the sluggish consumer market, many small- and medium-sized enterprises don't have assets as a mortgage to borrow money.-VNA