“Reducing interest rates to support enterprises and serve for objective of economic growth” is the statement of Mr. Nguyen Duc Long, Deputy Director General of Monetary Policy Department of the State Bank of Vietnam (SBV) when talking about the aim of decreasing key interest rates and lending interest rates on July 7, 2017. The Decision took effect from July 10, 2010.
Deputy Director General Nguyen Duc Long of Monetary Policy Department
Following is an interview between Deputy Director General Nguyen Duc Long and the correspondent of the SBV Portal.
Question (Q): What is your assessment of interest rate situation for the first half of 2017:
Answer (A): In the first six months of 2017, the SBV faced many challenges to maintain the stability of the common interest rate in context of high inflation end 2016 and early 2017, increasing credit growth from the beginning of 2017, large volume of issued Government’s bonds with longer terms, and Fed’s interest rate raising. At some times, several commercial banks increased mobilizing rates for over 12 month terms. Assessing that development, the SBV focused on regulating liquidity appropriately in order to support credit institutions to stabilize interest rates, meeting with large commercial banks to collect information and requiring commercial banks to implement consistent measures of stabilizing common interest rate. As a result, in spite of pressure on increasing interest rate, the common interest rate of credit institutions was still stable. Specifically, the mobilizing rates for below 6 month terms were commonly at 4.8-5.4% p.a and 5.4 – 7.2% p.a for over 6 month terms, the lending interest rates for effective business plan were only 4-5% p.a.
Q: Why does the SBV decide to cut the key interest rates and lending interest rate while the common interest rate is relatively stable? Could you please tell about the basis and the objective of adjusting key interest rates of the SBV?
A: On the basis of assessment of inflation developments, banking performance and liquidity of credit institutions, the SBV decided to decrease by 0.5 percentage point p.a for the maximum VND short-term lending rate for priority fields in order to serve for the objective of economic growth and support enterprises. The ceiling mobilizing rate is maintained stable based on the prudent assessment of inflation developments and expectations, Fed’s interest rate adjustment and USD appreciation in the international market in the coming time.
To support for lending interest rate reduction, the SBV issued documents on instructing credit institutions to proactively conduct measures to ensure liquidity, implement measures of saving cost, and improving operational efficiency, apply proper lending fees. Moreover, the SBV reduced by 0.25 percentage point p.a for key interest rates, thereby supporting credit institutions to decrease cost of getting access to SBV loans when needed.
Q: What are the SBV’s measures of managing interest rates in the coming time?
A: In the coming time, in consistence with measure of reducing interest rate, the SBV will manage money supply in a flexible manner, support liquidity for credit institutions to cut down lending rate; regulate credit growth of the whole banking sector at about 18%, flexibly adjust it in line with practical developments of macro-economy and banking operations; enhance inspection and supervision and strictly tackle with violations related to interest rates.
Le Hang