State Bank cuts interest rate

Several commercial banks cut the lending rate before the State Bank followed the trend 

Accordingly, the refinancing and discount rates will be lowered to 7 and 5 per cent from the current 8 and 6 per cent, respectively. Meanwhile, the overnight inter-bank rate will be cut down to 8 per cent.

The new rates would be applicable since May 13.

The move is designed to support business in a difficult economic situation in which purchasing power remains low and enterprises’ capital absorption capacity is quite weak, according to the State Bank.

“This is a good policy move which will help lower lending rates for business,” said Alan Pham, chief economist at VinaCapital Group.

However, he said the move suggested that the State Bank was now trailing financial market trends, as many banks like Vietcombank had already lowered rates.

One  banking expert said the State Bank’s move to cut rates this time did not surprise the market at all because many big commercial banks reduced its rates during last week.

Early last week, Vietcombank took the lead in slashing the deposit interest rate to 6 per cent per annum. After that, other banks including BIDV, Vietinbank, Agribank and Military Bank also had a similar move following Vietcombank to lower deposit rates.

“The role of a policy-maker like State Bank is to be out in front leading the market. Therefore, next time, the State Bank should be more pro active to not just reactive to market,” he added.

He said the rate cuts would directly affect banks’ input capital which take conditions for them to support more for businesses and continue lowering lending rates.

The State Bank deputy governor Nguyen Dong Tien said that the State Bank would keep the current interest rate ceiling unchanged at 7.5 per cent.

Nguyen Thi Hong, director of the Monetary Policy Department under the State Bank, said with the inflation rate expected at 6.5-7 per cent this year, the ceiling of 7.5 per cent was suitable which could ensure depositors’ benefits.

“Commercial banks also said it was reasonable that the interest rate ceiling returned to the same level in 2004-2005,” she added.n