Transaction at a bank
Hanoi (VNA) – The State Bank of Vietnam (SBV) has announced to cut a series of interest rates from March 17.
Experts said this is the central bank’s right step at that time, suitable to macroeconomic developments, international financial market, contributing to easing difficulties for domestic production and business activities.
Lowering capital costs for businesses
The SBV made its decision in the context that the US Federal Reserve (FED) has sharply reduced key interest rates to 0-0.25 percent per annum in just two weeks. Many central banks around the world had similar moves following FED’s decision.
Thanks to lowering a series of key interest rates, including refinance rate, discount rate, overnight lending rate in the inter-bank market, credit institutions that need capital can access direct loans at low interest rates from the SBV.
Besides, the interest rate for under-six-month deposits was cut, affecting the ceiling interest rate of deposits.
Director of the Monetary Policy Department at theSBV Pham Thanh Ha further analysed that the central bank’s decision is based on close watch on developments of the international market, Vietnam's macro-economic situation, especially the inflation pressure which was eased thanks to a sharp drop in oil prices.
The reduction of key interest rates, including refinance rate and open market operation (OMO) interest rate showed the SBV's readiness to support credit institutions in accessing capital sources.
The SBV’s decision aims to support interest rate cut for loan needs on the basis of considering macroeconomic fundamentals, ensure the goals of inflation control and the credit institution system’s stable operation, Ha said.
Apart from measures to waive and reduce interest rates in recent years, the reduction of 0.5 percent a year on the maximum short-term lending interest rate for priority areas will help cut capital costs for enterprises, he added.
Experts said this is a decisive move of the SBV to the financial market and commercial banks. Previously, in 2019, the bank also cut its benchmark interest rate in September and November with a slight decrease of only 0.25 percent a year for each time.
Production activity at an enterprise (Photo: VietnamPlus)
Promoting economic growth
Experts said the cut of interest rates will help reduce capital costs for the economy, especially for investment and consumption activities. By doing so, a large amount of money can be put in place to boost investment and support enterprises that are facing difficulties.
Dr. Le Xuan Nghia, a member of the National Financial and Monetary Policy Advisory Council, highlighted the significance of the central bank’s decision, saying that the policy has helped create more financial sources for commercial banks, enabling them to restructure debts, extend the repayment periods and provide new loans in order to support businesses facing financial difficulties caused by the COVID-19 pandemic.
Dr. Vo Tri Thanh , a member of the National Financial and Monetary Policy Advisory Council, said that this is a necessary and appropriate step at present, showing the central bank’s caution in both maintaining macroeconomic stability and creating a foundation for supporting businesses when the pandemic is under control.
The central bank’s decision to lower refinance rate shows that the bank is ready to provide lower-cost capital sources for commercial banks, enabling them to restructure debts to provide new loans./.
| On March 16, the State Bank of Vietnam announced to lower the refinance rate to 5 percent a year from 6.0 percent a year, the discount rate to 3.5 percent a year from 4 percent a year. The overnight lending rate in the inter-bank market has been also adjusted down to 6 percent from 7 percent and the open-market-operation (OMO) rate, to 3.5 percent from 4 percent. The central bank has also reduced the caps on the interest rate of Vietnamese dong-denominated deposits and loans by 0.25-0.5 percentage points, depending on the maturities. |
