On June 10, the State Bank raised the prime interest rate by a whopping 2 percentage points, from 12 to 14 percent per year. The refinancing rate was set at 15 percent per year, up by 2 percentage points, and the discount rate at 13 percent per year, up 2 points.
These new rates are effective as of June 11, marking the third time the central bank has raised the benchmark in the past six months.
The most recent hike was on May 19 when the prime lending rate was raised to 12 percent from the previous 8.75 percent.
The prime rate set by the central bank is used by commercial banks to set up their own interest rates, for deposits and loans.
Pursuant to the nation’s Civil Code, lending rates cannot exceed 1.5 times the prime rate. That means the banks are now required to have lending interests rates of no more than 21 percent per year, rather than the 18 percent ceiling of the past three weeks.
Commercial banks have not yet overcome liquidity shortages given the very low growth rate of deposits. They have raised deposit rates to over 16 percent per year. Some have gone as high as 16.56 percent for three month deposits.
These rates hover near the lending cap of 18 percent, which leaves a very thin profit margin for banks.
While previously implementing the 18 percent lending cap, most banks began plying loan-seeking clients with additional fees, pushing real lending interest rates to around 21-22 percent per year.
In response, central bank Governor Nguyen Van Giau in his Official Document No 5158/NHNN-CSTT prohibited banks from tacking on such extra fees.
Central bank offices in provinces and cities will have to monitor commercial banks to make sure they comply with the new requirement.
(Source: www.vnagency.com)