Deposit interest rate cap to be removed after market stabilizes: governor

Deposit interest rate cap is just an administrative solution only being used in the short term. When the market becomes stable, the deposit rate cap will all likely to be removed, said the State Bank of Vietnam (SBV)’s governor, Nguyen Van Binh.
According to Binh, the central bank has recently purchased a large amount of foreign currency and injected a relatively large amount of dong into circulation. Therefore, the liquidity of banks has been improved significantly.

Binh also noted that the capital sources to buy foreign currency were non-term money. Thus, the capital for the economy has increased considerably.

The credit growth in the first seven months of this year reached only 7.5% while the capital for the economy increased. However, SBV’s governor said that this credit growth rate is for reference only.

In addition, Binh said that some banks are in surplus of capital, but they can not lend because their credit growth limit has been used up. Meanwhile, other lenders have room for lending, but they are lacking in capital. Even, some banks have both capital and room for lending, but they do not want to lend for the fear of high risks.

With the current regulations, the capital sources are being allocated unevenly so the central bank’s task in upcoming time is to provide measures to regulate the amount of money.

According to Binh, the compulsory reserve ratio (CRR) may be raised as a solution to regulate the capital flows.

SBV’s governor also said that the deposit rate cap is just an administrative solution, using only for a short time. When the market becomes stable, this cap will be certainly removed.

Binh also added, to regulate the capital flows, the central bank can use different measures. – Vietbiz24

Tags: Vietnam banking industry, Vietnam deposit rates, Vietnam finance, Vietnam financial