Viet­nam cbank takes steps to halt in­fla­tion

The Pak Banker - - Company& -

HANOI: Credit in­sti­tu­tions would be asked to re­tain a ceil­ing in­ter­est rate of 14 per cent per year on dong de­posits to sta­bilise the coun­try's mon­e­tary mar­ket and re­duce the risk of in­fla­tion, said State Bank of Viet­nam Gover­nor Nguyen Van Giau on Satur­day.

He made the com­ments in a state­ment read at a meet­ing held by the Na­tional Assem­bly's Eco­nomic Com­mit­tee, held to ad­dress con­cerns over re­cent high in­ter­est rates.

The com­mit­tee chair­man Ha Van Hien said the high in­ter­est rate had caused the con­sumer price in­dex to surge in re­cent months.

Giau re­sponded by stat­ing that mon­e­tary poli­cies set by the cen­tral bank this year had fol­lowed Govern­ment's in­struc­tions. His state­ment showed that the to­tal money supplied for cir­cu­la­tion ac­counted for 75 per cent of tar­gets ap­proved by Prime Min­is­ter Nguyen Tan Dung. To­tal means of pay­ment in­creased by 23 per cent ex­clud­ing forex and gold prices.

There was an in­crease of 15 per cent in cash in cir­cu­la­tion while cred­its ex­pe­ri­enced an in­crease of over 27 per cent. Re­spond­ing to con­cerns about in­ter­est rate con­trol, Giau said there were three dif­fer­ent rates in the mon­e­tary mar­ket; the de­posit and lend­ing in­ter­est rate of credit in­sti­tu­tions; the lend­ing in­ter­est rate of those in­sti­tu­tions in the in­ter­bank mar­ket and the pref­er­en­tial rate of the cen­tral bank.

The cen­tral bank had set and an­nounced the ba­sic in­ter­est rate for the dong de­posits to con­trol the mar­ket as stip­u­lated in the Law on Bank­ing.

He said the in­ter­est rate for dong de­posits was low and less at­trac­tive than the rate for ac­counts in USD. When the deputy head of the com­mit­tee Le Quoc Dung sug­gested the lend­ing in­ter­est rate could af­fect busi­nesses and there­fore the econ­omy, Giau said this year's dif­fer­ence be­tween the de­posit and lend­ing rate of 2.5 per cent this year was ac­cept­able given that the dif­fer­ence in 2008 was 4.62 per cent.

Com­mer­cial banks could strug­gle if the dif­fer­ence were lower than 2.2 to 2.5 per cent, he said, adding that a small er­ror in mon­e­tary man­age­ment poli­cies could cause large shifts and even eco­nomic cri­sis. The real yearly rate has been 1.47 per cent, which was lower than in 2009, when the rate was 1.91 and 2006, when it stood at 2.23 per cent, Giau said. -PB News

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