Banking finance – Financial sector stable, as interest rates drop

Banking finance – Financial sector stable, as interest rates drop



HCM CITY — The domestic financial market has been kept stable over the first month of the year, while deposit and lending interest rates have both decreased.

Independent market watchdogs said that the domestic market was still running rather smoothly, with supply and demand of foreign currencies ensured. And this was in spite of the local market being affected by complications in the global financial market, they added.

The exchange rate in credit organisation transactions has already reached a ceiling. Meanwhile, the exchange rate between the US dollar and the Vietnamese dong on the free market was between VND150 – 216 higher than the rates offered by commercial banks.

The exchange rate between the euro and dong declined in proportion to changes of the euro on the international market. The EUR/VND exchange rate on the free market changed based on official market rate changes.

In January, most commercial banks cut their lending and deposit interest rates after the central bank decided to cut the annual basic interest rate from 8.5 per cent to 7 per cent.

In particular, interest rates for deposits in Vietnamese dong fell between 0.2 and 1.5 per cent per year in January against the previous month, with the current popular rates of 6.99 and 7.84 per cent per year.

Meanwhile, the borrowing rate was also down by between 0.5 per cent and 1.2 per cent to 10.82 and 11.52 per cent per year.

Some State-run commercial banks have provided loans with a preferential rates of 6.5 per cent to enterprises involved in sectors deemed to be "priority" by the Government.

The interest rate for dollar deposits dropped by between 0.5 per cent and 1.2 per cent/year to 2.35 and 3.55 per cent/year as compared with the previous month’s level. Meanwhile, the rates of dollar loans stood at 6.61 per cent, down by 0.1 and 0.5 per cent.

Generally, experts said, the decreases in both deposit and lending interest rates contributed to raising the volume of money injected into the economy in January by 0.52 per cent over the amount recorded in December.

Experts attributed the monetary market’s positive changes to efforts by the State Bank of Viet Nam (SBV) in supervising the domestic monetary market and credit institutions.

Among the measures taken have been injecting between VND5,000 billion and 6,000 billion to buy back valuable paper from credit institutions participating on the open market, and allowing commercial banks to withdraw their SBV compulsory bonds before maturity.

The bank also sold foreign currencies to credit institutions in order to meet demand. Additionally, it ensured an adequate supply of cash for credit organisations and stable and safe payment systems. — VNS