The State Bank of Vietnam (SBV), the country’s central bank, has announced its decision to further slash policy interest rates by 50 basis points in a move to support economic recovery.

The State Bank of Vietnam.

The SBV’s decision is in line with other major central banks around the world in face of the unfavorable global economic environment under the impact of the Covid-19 pandemic.

As per the decision, a 0.5 percentage point reduction would be applied to the refinancing interest rate, discount interest rate, overnight lending rate, and interest via open market operations (OMO). 

Accordingly, the refinancing interest rate is down from 5% per annum to 4.5%, rediscount rate from 3.5% to 3%, overnight interest rate from 6% to 5.5% and interest rate via OMO from 3.5% to 3%. 

The SBV also lowered the interest rate cap to 4.25% annually from 4.75% for deposits with maturities of one month to less than six months.

The deposit interest rate cap with maturities of less than one month is reduced from 0.5% to 0.2% per annum, while the maximum rate for deposit with maturities of one month to less than six months at people’s credit funds and micro finance services is cut from 5.25% to 4.75%.

Meanwhile, the SBV ordered banks to lower the maximum lending rate for short-term loans to 5% from 5.5%, with the aim of helping companies operating in the fields of agriculture, high-tech industries and exports, among others. Similarly, that rate at people’s credit funds and micro finance services is down from 6.5% to 6%.

The deposit rate for maturities of over six months is subject to each credit institution’s decision on the basis of supply – demand.

The cut is set to take effect on May 13.

The SBV on March 17 cut its policy rates by 50 – 100 basis points.