Six Vietnamese commercial banks, including the country's two biggest listed lenders, cut borrowing costs for businesses as the government strives to make credit cheaper to protect economic growth.
VietinBank, or Vietnam Joint Stock Commercial Bank for Industry & Trade, Joint-Stock Commercial Bank for Foreign Trade of Vietnam, also known as Vietcombank, and others lowered dong lending rates for loans to businesses and manufacturers to a range of 17 percent to 19 percent, according to a statement on the State Bank of Vietnam's website today.
Asian nations from Vietnam to India face a growth slowdown as the global recovery falters, adding pressure to prop up expansion even as inflation remains elevated. Vietnam's government, which faces a 23 percent inflation rate, said last month the central bank will keep policy interest rates unchanged for now and consider cutting them if price gains slow.
"We do see a lot of other Asian central banks stopping in their tracks, more or less putting the tightening cycle on the backburner right now," said Vishnu Varathan, an economist at Capital Economics (Asia) Pte in Singapore. "A similar concern could be ripping through the policy circles in Vietnam. While they do remain cognizant it's still too premature to reverse out the cycle, they're afraid of stifling the productive sector."
Some Vietnamese firms have faced growth challenges as the cost of capital has risen as high as 30 percent, Le Xuan Nghia, an adviser to the premier, wrote last month in a statement released at a conference in Hanoi. State Bank of Vietnam Governor Nguyen Van Binh said in August the monetary authority aimed to lower dong lending rates through to the end of 2011.
Vietnam Bank for Agriculture and Rural Development, or Agribank, the country's largest bank by assets, is expected to also lower rates to 17 percent to 19 percent soon, the central bank said in Friday's statement.
Thirty-four of Vietnam's 42 commercial banks implemented a request to comply with the caps on interest rates payable for dong and dollar deposits, it said. Banks are expected to report violations of the rate cap at other lenders to the monetary authority, according to the statement.
Vietnam's consumer prices increased 23.02 percent in August from a year earlier, the fastest pace among 17 Asian economies tracked by Bloomberg.