The State Bank of Vietnam (SBV) has decided to cut regulatory interest rates by a further 0.5 per cent, effective from June 19.

This will be the fourth time interest rates have been cut this year.

Under the SBV’s Decision No. 1123/QD-NHNN issued on June 16, the overnight lending rate in interbank electronic payments and loans to cover capital shortfalls in clearing payments of the SBV for credit institutions will be cut from 5.5 per cent per annum to 5 per cent.

The refinancing interest rate will be reduced from 5 per cent to 4.5 per cent per annum, and the rediscount interest rate from 3.5 per cent to 3 per cent.

On the same day, the SBV also issued Decision No. 1124/QD-NHNN on the maximum lending interest rate in VND for credit institutions.

The maximum rate for non-term and term deposits of less than one month remains unchanged at 0.5 per cent per annum.

The maximum for deposits with terms from one month to less than six months will be cut from 5 per cent per annum to 4.75 per cent.

However, the maximum interest rate in VND deposits at the People’s Credit Fund and microfinance institutions will be lowered from 5.5 per cent to 5.25 per cent per annum.

The interest rate on deposits with terms of six months or longer will be determined by the credit institution based on market supply and demand for capital.

Under Decision No. 1125/QD-NHNN issued on the same day, the SBV decided to reduce the maximum short-term lending interest rate in VND at credit institutions for borrowers to meet capital needs for economic sectors and industries in Circular No. 39/2016/TT-NHNN dated December 30, 2016, from 4.5 per cent to 4 per cent per annum.

The maximum short-term lending interest rate in VND at people’s credit funds and microfinance institutions will be reduced from 5.5 per cent to 5 per cent per annum.

The cuts were made following the recent issuance of resolutions by the National Assembly and the government on managing monetary policy and banking operations in a flexible, proactive, tight, and reasonable manner in harmony with fiscal policies and macro-economic policies, to curb inflation, stabilize the macro-economy and the monetary market, and reduce market interest rates for businesses and individuals, contributing to economic recovery, according to the SBV.