Vietnam may remove deposit rate ceiling by July

TN News

Email Print

Vietnam's central bank may remove a ceiling on deposit rates in June or July, a state-run newspaper reported on Tuesday quoting the governor, a move that could give banks more flexibility in raising funds as well as in setting lending rates.

The State Bank of Vietnam also aims to cut the rate ceiling by an average 1 percentage point each quarter or sooner if liquidity improves and inflation continues to slow, Governor Nguyen Van Binh told a government meeting on Sunday, according to the Vietnam Economic Times newspaper report.

Inflation in March slowed to an annual rate of 14.15 percent, from 16.44 percent in February, and the consumer price index rose just 0.16 percent from February, the slowest increase in 20 months, government statistics show.

On March 12 the central bank cut key rates on dong loans and deposits by 1 percentage point, the first cuts in nearly three years, and Binh was then quoted as saying commercial lending rates could now fall, helping businesses.

The central bank currently caps interest rates on dong deposits for one year or more at 13 percent and dollar deposits at 2 percent.

Commercial lending rates now stand at around 17-20 percent, a level that analysts said has prevented investment and hindered economic growth. With easing inflation and March's rate cuts, expectations are for lending rates to also ease, they say.

"If inflation continues to slow as expected and the government does not lower the regulated savings deposit rate cap of 13 percent too quickly, we forecast that real interest rates should become positive next month," the bank JP Morgan said in a report issued on Monday.

It projected Vietnam's annual inflation would slow to single digits by May while full-year inflation would be 10.3 percent for 2012 after a jump of 18.7 percent last year.

The country's economic growth in the first quarter slowed to a three-year low of 4 percent as domestic demand weakened and local industries grappled with high inventories.

The central bank last week asked lenders to bring down lending rates following cuts in major interest rates as the government aims to ease the burden on businesses.

On Sunday Prime Minister Nguyen Tan Dung and government officials met to consult with more than 30 Vietnamese scientists and economists on macro economic policies, especially those in finance, monetary sectors.

More Business News