Vietnam central bank eyes more interest rate cuts: deputy governor

Deputy Governor Dao Minh Tu said Tuesday that with suitable conditions, the State Bank of Vietnam may continue cutting the interest rates.

The central bank (SBV) official made the statement at a conference on boosting businesses’ capacity to absorb capital. He said further that the interest rate cuts aimed to serve short-term targets and should not have long-term impacts.

The central bank encourages commercial banks to reduce fees and other costs to decrease their interest rates in order to help businesses, Tu said.

He asserted that the central bank was capable of keeping the exchange rate stable amidst the policy of the U.S. Federal Reserve (Fed) and other nations. Nevertheless, monetary policy was only one tool to aid businesses, not a “magic wand” to cover all policies, he cautioned.

The SBV will push programs of credit for consumption, in order stabilize market sentiment and ensure social welfare, he said. It will also focus on providing credit for major economic sectors, small and medium businesses, and segments prioritized by the government.

For their part, commercial banks must continue with administrative reforms and reduce costs and fees by using modern technology, Tu noted.

In other measures, the SBV will cooperate with ministries and sectors to provide support related to credit and capital for infrastructure investors; public investment for traffic infrastructure; stock market and real estate market transactions; and firms switching their focus from exports to the domestic market.

The SBV has cut its refinance and discount rates by 50 basis points from June 19, its fourth policy rate adjustment this year.

Deposit interest rates below 8%

All but one Vietnamese commercial bank have lowered their deposit interest rates for 12-month terms to below 8% as of Wednesday. CBBank is the exception, offering 8.1% per annum for 12-month deposits and 8.2% for longer terms.

Other banks are offering interest rates of 7.6% or less for 12-month terms. The rate is 7.6% at Viet A Bank; 7.5% at ABBank, NCB, Bao Viet Bank, and PG Bank; and 7.4% at Eximbank and Vietbank.

The lowest interest rates on 12-month deposits are 6.3% at state-controlled creditors Agribank, VietinBank, BIDV, and Vietcombank, also known as the “Big 4” lenders accounting for more than half the credit in the economy.

The Big 4 banks have cut their deposit rates for other terms as well. For one-month and two-month deposits, the interest rates have fallen by 0.1 percentage points to 3.3%. Agribank decreased the interest rate for 13-24 month deposits from 6.3% to 6%. Vietcombank’s interest rates for deposits of 1-9 months have gone down by 0.1- 0.2 percentage points. BIDV has reduced its interest rates for one-month and six-month deposits to 3.6% and 5.3%, respectively.