Nhan Dan Online - From November 21, the VND-denominated base prime interest rate will be further cut to 11% per year from 12% per year, according to a decision issued today by the State Bank of Vietnam. The move is in response to the instruction of the Government on combating inflation, stabilising the macro-economy and maintaining sustainable growth, says the SBV.

Accordingly, the lending cap of credit institutions to ordinary customersdeclines to 16.5%from 18% per year.

The same day, the SBV Governor made several other decisions to reduce the refinancing rate to 12% per year from 13% per year, the rediscount rate to 10% per year from 11% per year, and the overnight rate in the inter-bank electronic payment and the rate of loans to finance short balances in clearing transactions between SBV and commercial banks to 12% per year from 13% per year.

In addition, the central bank also lower the reserve requirement ratio in VND versus the ratios stipulated in Decision No.2560/QĐ-NHNN dated November 3, 2008 by 2%.

Specifically, the reserve requirement ratios in VND applicable to the State-owned commercial banks (excluding the Vietnam Bank for Agriculture & Rural Development-Agribank), the Joint-Stock Bank for Foreign Trade of Vietnam (Vietcombank), urban joint-stock commercial banks, joint-venture banks, foreign bank branches and finance companies are down from 10% to 8% for demand deposits and time deposits with terms below 12 months and from 4% to 2% for deposits with terms from 12 months and longer.

For Agribank, the reserve requirement ratios decline to 5% from 7% for demand deposits and time deposits with terms below 12 months, and to 1% from 3% with terms from 12 months and longer.

The reserve requirement ratio in VND for rural joint-stock commercial banks, co-operative banks, the Central People’s Credit Fund decreases to 1% from 3% for the demand deposits and time deposits with terms below and over 12 months.

The above-mentioned measures are aimed at facilitating credit institutions to further enable their capacity of mobilisation and liquidity, to conduct effective and prudent business and to reduce their lending rates, thereby contributing to the promotion of investment, production and economic growth, explained the SBV.