Lower interest rates expected in coming days
17:52 | 09/03/2012

  VGP - It is time to lower bank interest rates by 1%, confirms Nguyễn Văn Bình, Governor of the State Bank of Việt Nam. 

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The open market operation, refinancing, and overnight rates will all be reduced by 1 percent, Governor Bình said at a press briefing in Hà Nội on March 6.

The ceiling interest rate will also be slashed by 1% for credit organizations, the bank governor announced.

A decision to lower the interest rates will be announced by the central bank in the coming days, he said.

He also revealed that the deposit interest rate will be adjusted down by 1% on a quarterly basis if anti-inflation measures pay off.

The move is considered a necessary step toward easing the difficulties businesses face in accessing bank loans to revamp production.

However, there is growing concern that by lowering the bank rates, Việt Nam may be loosening its monetary policy too swiftly, exerting pressure on anti-inflation efforts.

“We have made the decision after taking into consideration all possibilities, noting that the liquidity of the banking system has improved considerably,” said Governor Bình.

“Yet, the central bank will continue implementing measures to control the supply of capital to ensure credit organizations have capital to lend to businesses.”

According to Governor Bình, under the upcoming refinancing program, credit maturity terms will be adjusted to enable credit organizations to have a sufficient supply of capital for businesses.

The governor also added that the foreign exchange rate remains stable, and that the central bank is buying a large amount of foreign currencies to balance the market and increase the national foreign currency reserve.

Việt Nam’s foreign currency reserve rose 50% in 2011, and an additional 20% in the last two months. 

“With these positive signs, we are certain that the liquidity of credit organizations will continue to improve in the coming months,” said Governor Bình.

He pointed out that some credit organizations have run up high bad debts due to their poor performance. However, they account for less than10% of the whole banking system or just 6% of the domestic banking sector.

To help them iron out their snags, the central bank will issue treasury bills in different terms - one month, three months, six months or 12 months - to stabilize interest rates and mobilize redundant sources of money from credit organizations to control inflation and reduce pressure on the foreign currency market, he said. - VOV

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