Nguyen Ngoc Bao, director of the Monetary Policy Department under the State Bank of Viet Nam (SBV), said the bank announced on June 30 that the prime interest rate remained unchanged at 7 percent from July 1.

"SBV’s decision proves that the market interest rate will be controlled in coming months," he said.

"Such predictions were made based on several factors, one of which is the country’s macroeconomic situation, which saw some positive changes in the first six months."

The GDP grew by 3.9 percent while the national price index rose by 2.68 percent. The national trade deficit stood at US$2.1 billion.

The Viet Nam Chamber of Commerce and Industry also revealed that up to 91 percent of the country’s total enterprises were able to maintain staff as well as production and trade activities.

In addition, the money market and the banking sector in the last six months ensured a balance between capital supply and demand, and serviceable capital for local credit organisations’ payment activities.

The decrease in US dollar interest rates and slight fluctuations of foreign exchange rates had helped keep market interest rates stable, Bao said.

"The banking sector’s operation so far this year has proven to be better than last year," Ho Huu Hanh, director of the SBV branch in HCM City, said.

"This year, although local banks still met difficulties, they have had many opportunities to develop credit activities thanks to the Government stimulus policies, and have increased their revenue from this kind of business," Hanh said.

Experts said that in recent weeks deposit interest rates were adjusted at higher levels, with the highest rate of 10 percent applied to deposits with a term of 24 months or more.

Bao, however, said the adjustments were seen at some banks, but not widely, so it did not influence the common market interest rate.

Late June, commercial bank interest rates for dong deposits averaged 8.2 percent per year, up by 1 percent compared with the figure in late 2008. The annual lending rate was 10.04 percent, down by 3.5 percent.

"Lessons in capital management learnt from 2008 and implementation of the central bank’s new policies of ensuring balance between sources and use of funds, and the capital safe ratios, and seriously carrying out all lending conditions, are reasons why local banks have stable interest rates," Bao said.

Hanh said many commercial banks in HCM City had increased their deposit interest rates with the aim to ensure plentiful capital resources ready to meet enterprises’ increasing capital demand, particularly when the Government stimulus programmes take effect.

Most of these interest rate adjustments, however, were made for short-term deposits.

Future plans

"The central bank will apply several measures to ensure the stability of market interest rates in the remaining months," Bao said.

They include stabilising the prime interest rate, the recapitalisation interest rate and the discount interest rate, in combination with the implementation of some other monetary monetary tools, to strictly control monetary changes in the national economy.

Another task is to continue supervising the implementation of the Government’s interest rate subsidisation programme, capital ratios, and legal regulations on exchange rate management, and lending at agreed interest rates, Bao said.

"This method would ensure the safety of local banks’ business activities as well as their payment ability, and discover and penalise violations of rules by local commercial banks," he said.

The central bank would also work with relevant ministries and branches to carry out fiscal, monetary, investment and trade policies in line with the Government stimulus policies, Bao said.

Hanh urged local banks not to loosen credit and avoid careless risks since the global economic crisis had not yet ended.

Source: Vietnam News