Interest rates can fall to 10 pct: central bank

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Lending interest rates can fall to 10 percent in the next two years if the government successfully keeps inflation at a low level, State Bank of Vietnam Governor Nguyen Van Binh said Saturday.

"Interest rates of 17-19 percent used to be what businesses wished for, but now even 15 percent is still high. If the government takes measures and controls inflation, rates can be lowered to around 10 percent," he told business executives at a conference in Ho Chi Minh City.

Binh said deposit rates will drop to 7 percent by mid-2013, as long as inflation stays under 6 percent.

Vietnam's inflation slowed for an eleventh month in July, with consumer prices climbing 5.35 percent from a year earlier, according to the General Statistics Office.

Easing inflation has given the central bank room to reduce interest rates five times this year. It has also asked commercial lenders to cut rates on existing loans to below 15 percent.

Giau said Saturday that that after two weeks, only 35 percent of outstanding loans now bear rates of more than 15 percent, compared to 60 percent earlier.

However, he noted that the central bank cannot introduce a retroactive regulation to force rate cuts on loans that have been already given out by banks. So it can only call for commercial lenders to support businesses, Giau said. 

He also said the central bank cannot pump money into the market to rescue struggling businesses.

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"The central bank only needs to inject several hundreds of trillions of dong into the market and pale businesses will regain color immediately.

"But cash injection is not good in the long run"¦ How can we restructure the economy if we pump money to rescue even weak companies?" he said.

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