The central bank’s policy rates were reduced by another percentage point on Sunday, representing an effort to stimulate economic growth through loosened monetary policy.
In particular, the refinancing rate was lowered from 11% to 10%, while the discount rate was slashed from 9% to 8%. The overnight lending rate in inter-bank e-payment was pulled down from 12% to 11 %, according to Decision 1289 of the central bank issued last Friday.
The analysts at Vietnam Capital Securities Co. (VCSC) said this decision would not leave any significant impact on inter-bank transactions, as overnight rates were now relatively low, 4%-5.5 % for one-week terms and 6% for two-week terms.
The discount rate of 8% can be seen as a rate cap if the inter-bank market is in fever. Moreover, this signals that the central bank may further cut or even remove the deposit rate ceiling since the new discount rate is 1% lower than the current deposit rate cap of 9%.
The central bank’s statistics show that in the week from June 18 to 22, Vietnam dong deposit rates ranged at 1-2% per year for non-term deposits, 1% for terms of less than one month, 8.8-9% for terms of one month to below 12 months, and 10-12% for terms of 12 months or longer.
Meanwhile, U.S. dollar deposit rates were popular at 2% for individual deposits and 0.5-1% for deposits of economic entities.
The annual lending rate of 11-13% was offered for the priority groups of agriculture and rural, export, small and medium-sized enterprises and supporting industries. Other manufacturing and business sectors could take out loans with interest rates of 14-17%, while the lending rates for non-manufacturing sectors ranged from 16% to 20% a year.
The common greenback lending rates were 5.5-7.5% for short-term loans and 7.5-9% for medium and long-term.
In the inter-bank market, the interest rates for short-term transactions cooled down and the market remained stable. Most transactions centered around short terms of overnight to two weeks, with lending rates of 5.5-6.5% for terms of overnight to one week, 7-8% for 2- to 3-week terms, and 8.5-9% for one-month term, said a report of the Capital Department of BIDV last Thursday.
The central bank cited the reports of the credit institutions saying that the total transaction values in the inter-bank market in June 18-22 amounted to more than VND132.7 trillion, an average of around VND26.5 trillion a day. Transactions in U.S. dollar reached some VND79.03 trillion, or a daily average of over VND15.8 trillion.
Short-term transactions in Vietnam dong totaled nearly VND99.5 trillion, or 75% of the total dong transaction values. Meanwhile, short-term transactions in the greenback reached some VND60.19 trillion, 76% of total U.S. dollar transaction values.
VCSC analysts said though the repo rate remained unchanged under the latest decision of the central bank, it was now no longer necessary as the bidding process via open market operations (OMO) had been changed to avoid applying the repo rate of 10%.
“The change in the bidding process makes repo rate fall to 8%. These moves clearly show the effort to further ease the policy rates as economic growth is now the top priority in the last six months,” said a market report of VCSC released last Friday.
Experts said this move of the central bank was aimed at further loosening the monetary policy to support economic growth.
The General Statistics Office announced last Friday revealed that the Q2 gross domestic product increase by 4.66%, higher than 4% of the first quarter. To achieve a GDP growth of 6% by year-end, GDP in the second half must grow by at least 7.6%.
The Saigon Times Daily