The State Bank of Vietnam (SBV) has decided to lower interest rates by between 0.5% and 1% beginning from March 26.
Interest rates for short-term deposits in VND will be cut to 7.5% per year
The SBV's decision followed a fall in the country’s consumer price index (CPI) by 0.19% in March.
As a result, the cap for deposits at banks and financial institutions in VND with terms of from one month to one year would be reduced from 8% to 7.5% per annum.
The maximum interest rates for deposits of less than one month will be maintained at 2% per year.
For People’s Credit Funds, deposit interest rates, with terms from one to 12 months, will be lowered from current 8.5% to 8% per year.
Financial institutions and banks are allowed to set interest rates for deposits with terms of more than a year based on market demand.
The SBV will require a 1% reduction in interest rates in some financial services.
Annual interest rates on refinancing services and the overnight rate will also be cut by 1%, to 8% and 9% respectively.
Interest rates on rediscounted loans will be cut to 6% per year, from the previous 7%.
The cap of 11% for lending interest will be applied to industries, including agriculture and rural development, production and trade in exports, production and trade for small and medium-sized enterprises, supporting industry, and high-tech applications.
Local People’s Credit Funds and microfinance institutions will be allowed to apply a ceiling lending interest rate in VND for these industries, at 12% per year, the SBV said.
According to the SBV, apart from lower inflation rate, lending at banks and financial institutions is still modest, encouraging it to further cut interest rates.
Even though the SBV applied six interest rate cuts last year, many enterprises continued to find it hard to get bank loans amid economic difficulties.
