Vietnam banks to cut deposit rates further: central bank

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Commercial banks in Vietnam should gradually lower their interest rates on dong deposits to 10.5 percent next month and 10 percent by September, the central bank said on Wednesday, citing an industry agreement.

Banks in Vietnam agreed to cut their dong deposit rates to around 11 percent as of July 5 and will refrain from offering any other bonuses to attract deposits, the State Bank of Vietnam said in a statement, after urging banks to honor an agreement on the rate cut.

The agreement was reached with the Vietnam Banks Association acting as mediator to meet a government request that banks should cut their dong lending rates to 12 percent and deposit rates to 10 percent to help annual economic growth reach a targeted 6.5 percent.

Industry officials said it was feasible for banks to cut deposit rates to 10 percent, as Vietnam will try hard to cap annual inflation this year at 8 percent.

Lower rates could boost loan demand. The central bank has forecast loans would expand 25 percent this year after a surge of 37.73 percent in 2009 and 23.6 percent the previous year.

Earlier on Wednesday a central bank-run newspaper reported credit growth reached an estimated 11.36 percent at the end of June against the end of 2009.

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