SBV headquarters
Currently, the Covid-19 pandemic is spreading widely and affecting economic activities worldwide. In order to prevent the risks of recession, many Governments worldwide have conducted stimulus packages, and many central banks have cut down interest rates. Recently, the United States Federal Reserve System (Fed) has continuously cut down sharply the interest rate to 0-0.25% p.a., and has supported significantly the financial market’s liquidity. In the domestic market, the Prime Minister has issued Directive No.11/CT- TTg dated March 04, 2020 directing the urgent tasks and solutions to address the difficulties of production and business establishments, as well as to ensure social protection in order to cope with the Covid-19 pandemic. To be in line with the macro-economic developments and the international financial markets, as well as to tackle the difficulties of production and business establishments, the State Bank of Vietnam (SBV) has decided on new adjustments to the key interest rates, which take effect from March 17, 2020, specifically as follows:
1. Decision No. 418/QD-NHNN dated March 16, 2020 on the refinancing interest rate, the rediscounting interest rate, the overnight rate in the inter-bank electronic payments, and the rate of loans to finance short balances in the clearing transactions between the SBV and the commercial banks. Accordingly, the refinancing rate is cut down from 6.0% to 5.0% p.a.; the rediscounting rate is reduced from 4.0% to 3.5% p.a.; the overnight rate in the inter-bank electronic payments and the rate of loans to finance short balances in the clearing transactions between the SBV and the commercial banks is lowered from 7.0% to 6.0% p.a.
2. The interest rate of bids of valuable papers through the open market operations is cut down from 4.0% to 3.5% p.a.
3. Decision No. 419/QD-NHNN dated March 16, 2020 stipulating the caps for VND mobilizing interest rates applied for organizations’ and individuals’ deposits at the credit institutions and the foreign bank branches as stipulated in Circular No. 07/2014/TT-NHNN dated March 17, 2014. Accordingly, the maximum VND mobilizing interest rate for demand and below 1-month terms is reduced from 0.8% p.a to 0.5% p.a.; the maximum VND mobilizing interest rate for time deposits of 1-month to below 6–month terms decreases from 5.0% p.a. to 4.75% p.a.; the maximum VND mobilizing interest rate for time deposits of 1-month to below 6–month terms at the People’s Credit Funds and the Micro Finance Institutions is lowered from 5.5% p.a. to 5.25% p.a.; the mobilizing interest rates for 6-month plus terms may be decided by the credit institutions based on the capital supply and the demand in the market.
4. Decision No. 420/QD-NHNN dated March 16, 2020 on the cap for VND short-term lending rate charged by the credit institutions and the foreign bank branches to borrowers to meet the capital demand in several economic sectors in line with Circular No. 39/2016/TT-NHNN dated December 30, 2016, which is reduced from 6.0% p.a. to 5.5% p.a.; the maximum VND short-term lending rate for those areas at the People’s Credit Funds and the Micro Finance Institutions is lowered from 7.0% p.a. to 6.5% p.a.
5. Decision No. 421/QD-NHNN dated March 16, 2020 on the interest rates applied to the reserve requirement deposits and excess reserves of the credit institutions at the SBV. Accordingly, the interest rate applied to the reserve requirement deposits in VND is 1.0% p.a.; the interest rate applied to excess reserves in VND is 0% p.a.; the interest rate applied to the reserve requirement deposits in foreign currencies is 0% p.a.; the interest rate applied to excess reserves in foreign currencies is 0.05% p.a.
6. Decision No. 422/QD-NHNN dated March 16, 2020 on the interest rate for deposits in VND applied for the VDB, the VBSP, the People’s Credit Funds and the micro finance institutions at the SBV. Accordingly, the interest rate for deposits in VND applied for the VDB, the VBSP, the People’s Credit Funds and the micro finance institutions is 1.0% p.a.
7. Decision No. 423/QD-NHNN dated March 16, 2020 on the interest rates applied to the deposits of the State Treasury and the DIV at the SBV. Accordingly, the interest rate for deposits in VND of the State Treasury and the DIV is 1% p.a., while the interest rate for deposits in foreign currencies of the State Treasury is 0.05% p.a.
Le Hang