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Central bank raises key rate
The State Bank recently raised the refinancing rate for commercial banks from the 13 per cent to 14 per cent per annum, the discount rate from 12 per cent to 13 per cent per year, and the overnight rate from 13 per cent to 14 per cent. However, the prime rate in Viet Nam dong has been retained at 9 per cent.
This is the fourth time since February 17 that the State Bank of Viet Nam has revised key interest rates. The move is indicative of its determination to tighten the money supply to harness in inflation, which soared to almost 10 per cent in the first four months versus the 7 per cent target for the entire year.
The higher interest rates mean that banks will find it more expensive to borrow capital on the inter-bank market. Finally, enterprises at the bottom of the chain will suffer from higher lending rates.
Clearly with little lending going on and deposits flat or declining, smaller banks are being forced to raise their funding needs in the interbank market where rates have been very high, said Mac Cana, managing director of HCM City Securities Company.
At present, a slew of banks have mobilised funds at rates way higher than the 14 per cent cap set by the central bank. In effect, the lending rate applicable to enterprises is often more than 20 per cent per annum.
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