The State Bank of Vietnam, or central bank, has decided to boost the base interest rate for Vietnam dong by 3.25 percentage points to 12 per cent, effective from May 19, 2008.
Under the Decision No.16/2008/QD-NHNN, central bank will also raise the base discount rate by 1.5 percentage points to 7.5 per cent and the re-financing rate by 3.5 percentage points to 11 per cent.
Credit institutions must limit their deposit and lending interest rates for VND of 150 per cent or less over the base interest rate, meaning that dong lending rates cannot exceed 18 per cent per annum.
The regulation on 12 per cent interest rate cap is removed.
In the previous time, central bank raised the base interest rate from 8.25 per cent to 8.75 per cent, discount rate from 4.5 per cent to 6 per cent and re-financing rate from 6.5 per cent to 7.5 per cent and has kept these rates for seven months.
Nguyen Van Giau, the central bank’s governor, said at a press conference May 17 that the base interest rate hike reflected market interest rates and helped manage monetary policy and harmonized interests of depositors, credit institutions and borrowers.
The lowest inter-bank interest rate is 11 per cent, Vietnam Economic Times quoted Giau as saying.
Banks still have good liquidity now, he said, given that liquidity of May 16 was VND22 trillion.
Right after the new interest rates announced, the Bank for Investment and Development of Vietnam has decided to raise the dong deposit interest rates to 13.3 per cent per annum for terms of less than six months, to 13.5 per cent for six to 12 months, and to 13 per cent for more than 12 months, which increase by 1.2 per cent for short term and 1.5 per cent for long term. BIDV has also set the lending interest rates at between 16.5 per cent and 18 per cent. (Vietnam Economic Times)
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