The State Bank of Vietnam (SBV) has announced a reduction in key interest rates at credit institutions and foreign bank branches, applicable from March 13.

Under the decision, the refinancing interest rate is lowered to 14 percent from 15 percent per annum, the overnight rate in the inter-bank electronic payment is reduced to 15 percent from 16 percent, while the discounting rate is cut by one percentage point to 12 percent.

The SBV also decided to reduce the maximum VND mobilising interest rate per year to 5 percent from 6 percent for demand and term deposits with a term below one month and to 13 percent from 14 percent for term deposits over one month. The maximum VND mobilising rate is at 13 percent per year, down by one percentage point.

Local people's credit funds are exceptionally permitted to apply the maximum VND mobilising rate of 13.5 percent per year, a 1 percent decrease from 14.5 percent.

At a monthly Government meeting that took place on March 6, SBV Governor Nguyen Van Binh said key interest rates would be lowered by 1 percentage point and the deposit interest rate ceiling at credit institutions would be also reduced by 1 percent age point. As a result, the basic interest rate is at 8 percent, down from 9 percent.

Over the several past consecutive months, inter-bank interest rates have fluctuated from 7 percent to 14 percent per year, depending on the term, and the overnight inter-bank rate stood at 7-8 percent. The highest rate for one month was also at 13-14 percent. The rates showed the improvement in liquidity of banks.

It is possible to cut the deposit interest rate to 10 percent by late this year, if all favourable elements to reduce inflation are in place.

Many banks acted quickly following the Governor’s message.

Commercial banks have prepared to cut lending rates as part of their commitment with the SBV in facilitating business access to capital sources for production and business.-VNA