State Bank continues to lower deposit interest rate ceiling

The State Bank announced late on May 23 to reduce the ceiling interest rate on deposits under 6 months to 5% per year.

The decision to reduce interest rates takes effect from May 25.

The maximum interest rate for non-term deposits and deposits with terms of less than 1 month remains at 0.5% per year, the interest rate for deposits with terms from 1 month to less than 6 months is reduced from 5.5% to 5% per year. In particular, the maximum interest rate for deposits in VND at People's Credit Funds and microfinance institutions is reduced from 6% to 5.5% per year.

Interest rates on deposits with terms of 6 months or more are still set by banks based on market supply and demand of capital.

Interest rate (%/year)	Old	New
Interest rate ceiling for deposits from 1 month to less than 6 months	5.5%	5%
Overnight lending and shortfall financing rates	6%	5.5%
Recapitalization	5.5%	5%

In addition to reducing the ceiling on deposit interest rates, the State Bank also continues to adjust operating interest rates.

Of which, the overnight lending interest rate in interbank electronic payments and the State Bank's capital shortage-compensating lending rate for credit institutions decreased from 6% to 5.5% per year, the refinancing interest rate decreased from 5.5% to 5%. The rediscount interest rate remained unchanged at 3.5% per year.

This is the second time since the beginning of this year that the State Bank has reduced the ceiling interest rate on deposits and the operating interest rate. Previously, in early April, the ceiling interest rate on 1-6 month deposits was adjusted from 6% to 5.5%. On March 14, the State Bank also reduced 1% of operating interest rates, including rediscount and overnight lending.

Reducing the ceiling on deposit and operating interest rates, according to the State Bank, is "an important step, orienting the market's interest rate reduction trend in the coming time". This is a signal guiding banks to reduce lending interest rates.

The decision to reduce interest rates by the regulatory agency was made in the context of economic and business difficulties.

Mr. Vu Hong Thanh, Chairman of the Economic Committee, said that the economy showed signs of deterioration from the end of 2022, lasting until the beginning of 2023, resulting in GDP growth in the first quarter increasing by only 3.32%. To achieve the growth target of 6.5% this year, the average growth rate for each remaining quarter this year must be about 7.5%.

Difficulties in the financial market and corporate bonds make it difficult for businesses to access and almost impossible to mobilize capital. The main drivers of growth such as exports, foreign direct investment, especially industrial production are decreasing and on the decline.

Businesses are having difficulty with cash flow, but accessing loans is also difficult, with high interest rates. According to the Government's report, the average new lending interest rate is 9.3%, but data from the National Financial Supervisory Commission shows that the average lending interest rate at 35 commercial banks by the end of March was about 10.23%, 0.56 percentage points higher than at the end of 2022.

At a meeting in late April, the Prime Minister asked state-owned commercial banks to make maximum use of measures to reduce costs and lower interest rates to increase access to capital for people and businesses.

Minh Son

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