Central bank keeps interest rates at 7pc

A number of commercial banks have raised their dong deposit interest rates to ten percent, while the central bank recently decided to keep interest rates at seven percent. Sai Gon Giai Phong talked with the director of the Monetary Policy Department, Nguyen Ngoc Bao, to discuss rates and the possibility of risks to the monetary markets.

Mr. Nguyen Ngoc Bao (Photo: SGGP)

The fact that the Central Bank kept the basic interest rate at seven percent, said Mr Bao, indicates the ongoing effect of the State’s fiscal and monetary policies on interest rate control.

Mr Bao emphasized the positive changes in the country’s macro-economy over the past six months. GDP is reported to have reached 3.9 percent, the consumer price index increased 2.68 percent and the trade balance was just US$2.1 billion in the red.

Ninety-one percent of businesses have successfully overcome difficulties to stabilize production, which was revealed by recent reports from the Vietnam Chamber of Commerce and Industry, he added.

Mr Bao also stressed that the stabilized monetary market and banking system have successfully ensured equalization in capital demand and supply.

Available funds from banks were adequate for the demand of payment activities, dollar interest rates fell and there were no wild fluctuations in foreign exchange rates on the market.

The Central Bank and relevant authorities predicted that such a positive trend will continue in the remaining months of the year, and the basic interest rate of seven percent has been kept for the sake of macro-economic stabilization, as well as the safety of national credit system.

As to the number of commercial banks that have now raised deposit interest rates to ten percent, Mr Bao said that it will not affect lending activities of other banks because such a rise is only applied to two-year term loans.

Mr Bao, however, stressed that the Central Bank will carry out inspections of credit growth at banks nationwide, it will especially focus on monitoring the Government’s interest rate subsidy program, and tightening the management of exchange rates and foreign exchanges to ensure the banking system’s safe operation.

The Central Bank will also conduct inspections of loan interest rates, as agreed between banks and its customers, said Mr Bao.

A customer at a branch of Phuong Dong Bank (Photo: SGGP)

This will ensure banks do not apply interest rates that are to highand will unnecessarily affect the economy.

As a measure to stabilize the financial system in the second half of the year, the Central Bank, said Mr Bao, will continually regulate the basic interest rate and control market rates through following measures:

The Central Bank will flexibly make use of different monetary instruments so that it can regulate and control basic interest rates, refinancing interest rates and discount interest rates effectively, he said.

It will continue to carry out inspections of the commercial banks’ compliance with the Central Bank’s regulations on subsidized interest rates, security ratio, loans with interest rates as agreed between banks and their customers, and foreign exchange management, said Mr Bao.

Any bank that violates the regulations will face severe disciplinary measures, he added.

It will also coordinate with relevant authorities to carry out fiscal, monetary, investment and commercial policies in line with the Government’s guidelines on investment demand, he concluded.  

By Bao Minh – Translated by Phuong Lan

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