Central bank eyes lower bank lending rates

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Central bank eyes lower bank lending rates

Vietnam News - 1/23/2017 1:00:07 PM

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The State Bank of Việt Nam revealed recently that it would continue to keep bank lending interest rates unchanged from last year’s levels.

But analysts think this will be a very difficult task for the central bank since many factors are expected to impact the rates this year.

The first reason they mention is the imminent rise in the dollar after the US Federal Reserve increases interest rates an expected three times this year as economic growth and inflation pick up.

They say interest rates on the đồng always have a close correlation with the value of the greenback.

The second reason is that Circular No.06, which caps the ratio of short-term funds that can be used for medium- and long-term loans, will reduce it from 60 per cent to 50 per cent this year.

This has forced banks to restructure their finances and increase interest rates on medium- and long-term deposits.

The hike in wages this year is likely to bring inflationary pressure on the economy.

In the event, some even predict lending interest rates to go up by 1-2 percentage points.

One of the measures the central bank is proposing is cutting deposit interest rates.

Many state-owned banks such as BIDV and Agribank have started to lower the rates on deposits of one to five months by 0.2-0.3 points.

Other lenders have also reduced the deposit interest rates, though by a more modest 0.05-0.1 points.
Sacombank has cut the rates on deposits of two and three months by 0.1 point to 4.9 per cent and 5.2 per cent.

The Ministry of Planning and Investment seeks to push lending interest rates to under 5 per cent by 2020, but many analysts are sceptical about this too.

They said the rates cannot be cut any further since current rates are rather low compared with the average deposit interest rates.

The interest rates are around 6-7 per cent for priority sectors for short-term loans and 9-10 per cent for medium- and long-term loans.

The rates for normal production and business activities are between 6.8 and 9 per cent for short-term loans and 9.3 per cent and 11 per cent for medium- and long-term loans.

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