Savings interest rate ceiling reduced to 7%

The State Bank of Vietnam simultaneously reduced the highest deposit interest rate for USD from 2% to 1.25% per year and will remove the ceiling for deposits with maturities exceeding 6 months.

In addition to reducing the ceiling interest rate for Vietnamese Dong savings by 0.5% from the current 7.5%, the State Bank of Vietnam may remove the ceiling interest rate for deposits over 6 months. Furthermore, the central bank will reduce the ceiling interest rate for USD deposits for individuals from 2% to 1.2% per year. The highest deposit interest rate for organizations will also decrease from 0.5% to 0.25%.

The ceiling interest rate for Vietnamese Dong deposits with maturities of 12 months or less has been reduced to 7%. In addition, the State Bank of Vietnam will also remove the interest rate ceiling for maturities of 6 months or more.

This information was announced by Mr. Tien at the ongoing online meeting between the Government and localities for the first six months of the year. According to Mr. Tien, the reason for this adjustment is the ability to control inflation and the room for using interest rate tools.

"The Governor is chairing a meeting with relevant authorities, and in the near future, or even tomorrow, lending interest rates for the five priority sectors will be reduced from 10% to 9% per year. Deposit interest rates may also be adjusted; those under one year, currently at 7.5%, could be reduced to 7%, and there may be no ceiling on deposits over six months," he added.

In parallel with the above statement, the State Bank of Vietnam has also officially issued circulars confirming the reduction of VND and USD deposit interest rates and the removal of the deposit ceiling for terms exceeding 6 months. Previously, at the banking industry's summary conference on June 17th, Governor Nguyen Van Binh also stated that further reductions in USD deposit interest rates were planned to strengthen public confidence in the VND.

"But this is almost the final adjustment limit, as inflation is around 7% while interest rates have already fallen to 7%. Whether there will be further reductions depends largely on controlling inflation," Deputy Governor Nguyen Dong Tien said at the Government Conference.

According to him, the sharp reduction in lending interest rates has significantly impacted the income of credit institutions, with many no longer making a profit. The difference between input and output interest rates, without provisions, is only 3%, while with provisions it is only 1.93%, according to the Deputy Governor.

This is the seventh adjustment to deposit interest rates by the State Bank of Vietnam since the beginning of 2012, from 14% per year. Lending interest rates have also decreased significantly since then. Interest rates remain one of the main tools used by the State Bank of Vietnam to stimulate credit growth in the economy. As of June 20th, credit growth across the entire economy reached 3.31%.

Also at this online briefing conference, Prime Minister Nguyen Tan Dung issued directives to the State Bank of Vietnam regarding the management of the gold market. Accordingly, the Prime Minister requested that all banks close their accounts by June 30th and that no extensions be granted to any bank. In response to this request, the Deputy Governor stated that they are monitoring the situation daily to ensure the deadline is met.

According to VnExpress - TH