The State Bank of Vietnam, the country's central bank, has decided to cut its policy interest rates by 50 - 100 basis points as the Covid-19 epidemic is taking a heavy toll on the economy and major central banks have cut their respective interest rates. 

The State Bank of Vietnam.

A 0.5 - 1 percentage point reduction applies to refinancing interest rate, discount interest rate, interest rate applicable to overnight loans, and interest via open market operations (OMO). 

Following the decision, the refinancing interest rate is down from 6% per annum to 5%, rediscount rate from 4% to 3.5%, overnight interest rate from 7% to 6% and interest rate via OMO from 4% to 3.5%. 

The SBV also lowered the interest rate cap to 4.75% annually from 5% 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 0.8% to 0.5% per annum, while the maximum rate for deposit with maturities of one month to less than six months at people’s credit fund and micro finance services is cut from 5.5% to 5.25%.

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

Meanwhile, the SBV also ordered banks to lower the maximum lending rate for short-term loans to 5.5% from 6%, aiming to help companies operating in the fields of agriculture, high-tech industries and exports, among others. Similarly, that rate at people’s credit fund and micro finance services is down from 7% to 6.5%.

The cuts take effect today [March 17].

According to the SBV, the unfavorable global economic environment under the impact of the Covid-19 epidemic has led to the cut of benchmark interest rates of major central banks, including the Federal Reserves (Fed).

The Fed in an emergency move on Sunday decided to cut its benchmark rate to 0 – 0.25% from the previous target range of 1 – 1.25%, in turn providing liquidity to financial systems.

On the domestic front, Prime Minister Nguyen Xuan Phuc on March 4 issued directive No.11 detailing a number of solutions to help businesses cope with Covid-19.

To better reflect the current macro-economic conditions and global financial markets, the SBV decided to adjusted its benchmark interest rates.