SBV to adjust operating interest rate

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The SBV decided to reduce operating interest rates.

Due tothe development of the Covid-19 epidemic, on the evening of March 16, the SBV issued Decision No. 418 / QD-NHNN on refinancing interest rate, rediscount interest rate, and interest rate applicable to overnight loans in the inter-bank electric payment and applicable to loans for making up capital deficit in the clearing payment of SBV for banks.

Accordingly, the SBV has decided to reduce the refinancing interest rate from 6.0% per year to 5.0% per year; the rediscount interest rate from 4.0% per year to 3.5% per year; the interest rate applicable to overnight loans in the inter-bank electric payment and applicable to loans for making up capital deficit in the clearing payment of SBV for banks from 7.0% per year to 6.0% per year.

In addition, the interest rate of bids of valuable papers through open market operations is reduced from 4.0% per year to 3.5% per year.

Along with that, themobilizinginterest rate ceiling in VND of credit institutions for non-term deposits decreases by 0.3% per year (from 0.8% per year to 0.5% per year); for 1-month to 6-month term deposits reduced by 0.25% per year (from 5% per year to 4.75% per year); the maximum interest rate applicable to deposits with terms of from one month to less than six months at People's Credit Funds and microfinance institutions reduces from 5.5% per year to 5.25% per year; and the interest rate for deposits with terms of six months and more shall be set by the credit institution on the basis of market capital supply and demand.

In addition, the maximum interest rate for short-term loans of credit institutions to customers in five priority areas reduces by 0.5% (from 6% per year to 5.5% per year); the maximum interest rate for short-term loans in VND of People's Credit Funds and microfinance institutions for these capital needs decreases from 7.0% per year to 6.5% per year.

The SBV also set an interest rate for compulsory reserve depositsin VND at VND 1.0% per year, an interest rate for compulsory reserve deposits in excess in VND at 0% per year,an interest rate for compulsory reserve deposits in foreign currencies at 0% per year, an interest rate for compulsory reserve deposits in excess in foreign currencies at 0.05% per year.

The deposit interest rate in VND of Vietnam Development Bank, Vietnam Bank for Social Policies, People's Credit Fund and microfinance institutions is 1.0% per year.

The SBV also stipulates that the State Treasury's deposit interest rate in VND is 1.0% per year, in foreign currency deposits is 0.05% per year, interest rates andthe deposit interest rate in VND for insurance deposit is 1.0% per year.

With the above, this is the first time in many years the SBV has decreased sharply by 0.5-1% per year in the main interest rates.

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Previously, the SBV had divided the types of reductions in 2019 with a reduction of 0.25% per year in the key interest rates.