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State Bank tightens dollar interest cap
The State Bank of Viet Nam yesterday reduced further interest rate caps payable on US dollar deposits by 0.5-1 percentage point in an aggressive move to discourage economic entities' dollar accumulation and strengthen the domestic currency.
The interest caps were cut to 0.5 per cent per year for institutional depositors and 2 per cent per year for individual depositors. The interest rate caps cover all types of promotional costs and are applied for term-end payment.
The decision came one day after the central bank told groups, corporations and enterprises that are over 50 per cent-State-owned to sell the dollar to commercial banks next month.
The central bank also raised compulsory reserves in foreign currencies from 6 per cent to 7 per cent, which received a number of mixed reactions.
Earlier in April, the State Bank capped rates payable on dollar deposits in the US currency at 3 per cent for individuals and 1 per cent for non-credit institutions. It advised economic groups to sell the dollar to banks.
The series of actions is believed to ease the downward pressure on the value of the Vietnamese dong and to enrich the dwindling national foreign reserves.
Foreign reserves earlier this year were estimated at US$12.2 billion or nine import weeks, from a level of nearly $24 billion at the end of 2008.
Deepak Mishra, lead economist of the World Bank in Viet Nam yesterday told the mid-term Consultative Group Meeting's press briefing that the implementation of Resolution 11 should be retained until the level of international reserves was adequate to finance at least 2.5 months of prospective imports.
Mishra added it was acceptable if such foreign reserves could be stored in the central bank's stock or in commercial banks.
The central bank recently reported on the banking operations during the week of May 21 to 27 whereby the average interest rate in US dollar in the interbank market increased by 0.05-0.76 per cent in all terms. The total trading turnover saw 34 per cent fall in US dollar transactions.
According to the latest report from commercial banks, the total weekly trading turnover in the interbank market as of May 25 reached approximately $2.659 billion, averaging at $532 million per day.
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