The government should not apply any caps on either deposit or lending interest rates as it’s not good for the market, one economist has said.
Government proposed to reduce administrative measures in the banking system
Economist Vo Tri Thanh, Deputy Director of the Central Institute for Economic Management, said, “Any administrative interference could distort the market in terms of both resources and morality.”
According to Thanh, his views have been proven by negative impacts on the market in 2008 when the country applied a ceiling lending interest rate.
He said that Vietnam should try to gradually reduce administrative measures with priority given to removing the ceiling interest rate for deposits in VND and then USD under the condition that the potential dollarisation of the economy is avoided.
He estimated that if bad debts are settled, the State Bank of Vietnam could remove such a cap by the end of this year.
The issue remains controversial when many enterprises and banking experts have proposed maintaining ceiling lending interest rates but removing the cap on deposit interest rates so as to pull down lending interest rates and facilitate enterprises to get bank loans.
Despite a considerable disparity between deposit and lending interest rates, deposit interest rates could be further cut by 0.5% to around 7% per annum.
The trend heavily depends on the progress in dealing with weak banks and bad debts, he added.
