Vietnam Money-Banks aim to cut rates from July

Banks in Vietnam have agreed to cut interest rates from July to support the government’s target of 6.5 percent economic growth this year, but bankers said they do not expect a significant drop.

Top lenders have pledged to cut lending rates to 12-12.5 percent from July from around 13 percent at the moment, the State Bank of Vietnam said on its website.

They also agreed after a meeting with the central bank governor to bring their deposit rates down to 11 percent next month from 11.5 percent, and to 10.2-10.5 percent by September, it said.

The central bank said on Thursday it was holding its base rate at 8 percent in July. [ID:nHAN218821]

“The central bank will have to strongly support lenders via its open market operations. Otherwise, they won’t be able to cut deposit and lending rates,” a trader with a Hanoi-based bank said.

Banks still faced difficulty raising funds due to depositors’ expectations of higher rates, said an official from another bank in Hanoi. “Lenders hesitate to cut deposit rates for fear of losing depositors,” he said.

Banks’ deposits at the end of May had risen 7.8 percent from December while credit in the same period was up 7.46 percent, the central bank said in a monthly report. However, that is way below Vietnam’s credit growth target this year of 25 percent.

The meeting on Friday was the central bank’s second call to lenders to cut rates this month, after one on June 11. [ID:nSGE65D05Z]

“I don’t think there will be a significant change in the rate level. Instead, banks will cut rates in small steps and keep an eye on how the central bank supports the process,” the Hanoi-based trader said.

Vietnam’s GDP grew around 6.2-6.4 percent in the second quarter from a year before after 5.83 percent in the first quarter, and first-half GDP grew 6.0-6.1 percent from a year earlier. [ID:nHAN412761]

The growth rate in the first half suggested Vietnam might hit its 6.5 percent target, economists said, but they said higher credit growth was needed to maintain the pace in the second half.

reuters

Tags: Vietnam finance, Vietnam financial, Vietnam money