Strong money injections have improved banking liquidity: central bank

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Liquidity in the banking system has improved significantly thanks to a strong money supply from the central bank but the bad debt ratio is still high, State Bank of Vietnam Governor Nguyen Van Binh said.

The central bank has injected about VND180 trillion into the economy, buying US$9 million worth of dollars so far this year, Binh was quoted by the VnEconomy newwire as saying last week.

The State Bank also pumped into the economy VND60 trillion to finance agriculture projects in February, after injecting VND30 trillion into the banking system late last year to rescue banks with liquidity problems.

"The total amount of money from the central bank was very large. That's why liquidity of the banking system has improved significantly, compared to the end of the fourth quarter of 2011 when banks were facing the risk of serial collapses," Binh said.

However, the governor noted that the bad debt ratio of the system has reached 10 percent of total loans, making it difficult for banks to lower interest rates at a fast pace. The ratio announced by Binh in April was 3.2 percent.

The central bank will slash key interest rates from June 11, the fourth round of rate cuts this year following consecutive reductions in March, April and May. The refinancing rate on loans to commercial banks will be cut to 11 percent from 12 percent while the discount rate will be lowered to 9 percent from 10 percent.

The cap on deposit rate will also be lowered from 11 to 9 percent.

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