Vietnam cbank takes steps to halt inflation
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