Cutting interest rate feasible in year end

11:37 | 16/08/2016 Economy

Stable current liquidity in the banking system ensured money supply for the economy in 2016 and provides room for cutting interest rates in the rest of 2016, assessed a senior banking expert.

Cutting interest rate feasible in year end

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Tran Hoang Ngan, a member of the National Financial Supervisory Commission (NFSC) mentioned a series of reasons for lower interest rates, including declining Government bond interest rate (about VND 250,000 billion);  lower pressures on interest rate hikes, as well as low inflation rates (3.5-4%),


To the end of the year, the monetary policies should continue to sticking to the objectives of macro-economic stability and coordinating with fiscal policy to control inflation rate and reduce the interest rate in favor of business development.

The SBV will keep close watch on macro-economic developments, currency and banking operations to run synchronously and flexibly tools of monetary policy; adjust mainly through open market operations, refinance with reasonable terms, volume and interest rates to support the liquidity and capital to credit institutions but ensure inflation control target.

The SBV will also continue directing credit institutions to balance between the capital usage and stable interest rates, as well as reducing operating costs and improving business efficiency to reduce lending rates.

In addition, the exchange rate from the beginning of the year was quite stable. Year-end exchange rate is forecasted in the range of expectations (3%); commercial banks’ profit in the first six months of 2016 was relatively positive, create conditions for handling bad debts and reducing system’s operating costs.

Besides the good liquidity thanks to the high mobilization’s increase rate compared to credit’s growth (10.2% and 8.16% against the beginning of the year; 6% and 7.86% against the same period of 2015), the credit structure has shifted to the five priority areas, in accordance with the policy of the Government.

Thus, there are many favorable conditions to reduce interest rates, but to maintain it, the banking system needs to proactively reduce operating costs and handle bad debt, said the NFSC expert.

The lending interest rates have fallen sharply and  no longer pose obstacles to business’ production activities, said a State Bank of Viet Nam (SBV) leader.

Viet Nam’s annual lending interest rate which is about 6-11% remained at relatively reasonable compared to other countries in the region such as Myanmar (13%), Indonesia (12.7%), India (10.3%), Thailand (6.6%), the Philippines (5.5%) and Singapore (5.4%), he added./.


Source: VGP