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Vietnam Financial News

Vietnam Business » Vietnam Financial News » Banks Cut Interest Rates By 1-2pct

Banks Cut Interest Rates By 1-2pct

However, in the meeting of SBV with Vietnam Banking Association and commercial banks taking place at the first weekend of June, banks said that they found it very difficult to lower interest rates with multiple causes, including high bonds coupon rates and difficulty in raising capital.

In efforts to help banks to increase liquidity and access cheap capital, the State Bank of Vietnam (SBV) has actively "pumped" more money with longer term and a larger volume through refinancing and open market operations.

Only in the first week of June, the central bank had poured capital into commercial banks with 33 trillion dong and 50 trillion dong in May.

From these concerted efforts of the SBV, few banks have reduced lending interest rates by 1-2 percent per year.

Nonetheless, if looking at the changes of the monetary market over the past months, it would appear that banks are not too interested in lowering interest rates down to 12 percent as the governments directive. As if to balance well, the interest rates lowered to 12 percent per year can still be achieved.

The first base was to reduce interest rates in late March and early April as the central bank injected capital through open market operations. This market interest rate was only 7.5 to 8 percent per year.
Tools for banks to raise funds through open market operations are also relatively abundant when the auctions of government bonds were recently successful with the decreasing bid rates.

The two trillion dong auction of government bonds were sold on June 17 with a 10.6 percent interest rate for term of three years and 10.95 percent for 5-year term.

Earlier, of the 3.8 trillion dong bonds of 2-years, 3 years and 5 years that was auctioned successfully in May, there was about 1.8 trillion dong of commercial banks with interest rates at below 11.25 percent.
Banks have had more valuable papers to mortgage to borrow loans from the State Bank with low interest rates - more cheap capital sources.

Since early April, interbank interest rates have been tending to decrease and by the fourth week of June, the lowest lending rate was 5 percent per year (excluding call interest rates).

Pham Quyet Thang, director general of GP Bank also acknowledged that the drop in lending interest rates was difficult, but banks could still cut the rates.

Vietnam Business And Financial News Network. Source [stox.vn]

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