Lending rates to drop: central bank

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Short-term lending rates in Vietnam are expected to come down, thanks partly to funds the central bank has extended to banks, State Bank of Vietnam governor Nguyen Van Giau was quoted on Wednesday as saying.

Lending rates were not falling quickly at present because banks were cutting deposit rates slowly, Giau said in an interview published by the Finance Ministry-run Vietnam Financial Times newspaper.

"But credit institutions are actively raising funds in coordination with funding support from the State Bank to meet credit demand for the economy," Giau said in the interview.

"So, short-term lending rates will fall significantly, while the reduction of medium-and longterm lending rates requires time because long-term deposits often rise very slowly and account for a low proportion of overall deposits," Giau said.

The central bank injects funds into banks via open market operations.

Bank deposits in Vietnam as of August 17 had risen 17.44 percent from the end of 2009, while credit expanded 14.15 percent, Giau said without giving any values.

Credit demand is expected to rise as usual in the last months of the year, Giau said, pledging further steps to keep annual inflation at around 8 percent, economic growth at 6.5 percent and an annual credit growth at 25 percent, as targeted.

The average rate for one-month interbank loans dropped to 8.56 percent during the week ending August 26, from 8.67 percent a week ago, and the rate on three-month loans also eased to 9.74 percent from 9.99 percent, central bank reports said.

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