Some fundamental amendments on interest rates of the State Bank of Vietnam

By Le Thi Hong Tham, Legal Assistant

Cut-off the ceiling interest rate

The State Bank of Vietnam has issued Circular No. 19/2012/TT-NHNN on 08 June 2012 amending and supplementing some articles of Circular No. 30/2011/TT-NHNN dated 28 September 2011 of the State Bank of Vietnam prescribing the ceiling interest rate for Vietnam-dong capital mobilizations of institutions, individuals at some credit institutions, branches of foreign banks ("Circular 19").

Under Circular 19, the ceiling interest rate of 2% per year (reduced by 1% compared to the previous period) is applied to non-term deposits and term deposits of less than 01 month. The maximum mobilizing rate for terms of from 1 month to less than 12 months is 9% per year. The grassroots People's Credit Funds may fix annual interest rates so as not to exceed 9.5%.

Interest rates of term deposits from 12 months or more are set by credit institutions and foreign banks based on capital supply and demand in the market.

The application time of such modifications shall be 11 June 2012 and, according to the State Bank of Vietnam, is intended to "remain relatively stable"; further adjustments (if any) will be smaller and insignificant.

The maximum short-term lending rate

Also on the date of 8 June 2012 the State Bank of Vietnam issued Circular No. 20/2012/TT-NHNN providing guidelines on amending and supplementing some articles of Circular no. 14/2012/TT-NHNN dated 04 May 2012 stipulating the maximum VND short-term lending rate to be charged by credit institutions and branches of foreign banks.

As of 11 June 2012 the maximum short-term lending rate in Vietnamese Dong  is 13% per year; particularly,  the grassroots People's Credit Funds shall set the rate up to 14% per year.

Reducing refinancing rate

Under Decision No. 1289/QD-NHNN dated 29 June 2012 the refinancing and rediscounting rates will be cut to 10% per year and 8% per year respectively and the overnight rate in the inter-bank electronic payment system and lending gap in the State Bank of Vietnam clearing for other banks now stands at 11% under the provision.

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