Tuesday , October 4 2022

Central bank to nudge commercial banks against lending interest rate hikes

The State Bank of Vietnam will encourage commercial banks to lower its costs to keep lending interest rates unchanged, a deputy governor said Friday.

The bank would not regulate lending interest rates because they depend on negotiations between lenders and their clients, deputy governor Dao Minh Tu said.

On Thursday, for the first time in two years, the central bank increased a series of regulatory interest rates, including deposit, rediscount and refunding rates. On Friday, commercial banks announced new deposit interest rates.

The higher deposit interest rates will help banks increase liquidity, but usually leads to higher loan interest rates as well. Early this year, the central bank had pledged to reduce lending interest rates in the 2022-2023 period.

Tu said the central bank hiked regulatory interest rates to control inflation, stabilize the exchange rate and foreign exchange markets and ensure security of the banking system.

It has so far kept the credit growth target at about 14% this year, but there will be adjustments depending on actual situations, he added.

As of mid-September, Vietnam’s credit had grown by 10.47% against late 2021, and expanded by 17.19% over the same period last year. Bank loans were mainly used for production and business.

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