OMO rates cut to support growth

The State Bank of Vietnam (SBV) late last week announced its first interest rate cut in the open market operation (OMO) in the past five years
The move is aimed at supporting economic growth as it will contribute to reducing the cost of funding for commercial banks, thereby helping them cut lending rates for domestic firms.

Accordingly, OMO rates were lowered by 25 basis points to 4.75 percent per annum. The last cut was made in March 2014 when the rate was trimmed by 50 basis points to 5 percent.

Previously, at a meeting of the banking industry last week, Governor of SBV Le Minh Hung also said that after the meeting, the central bank would issue Resolution 01 on implementing tasks of the banking sector in 2018, in which it would instruct credit institutions to consider a rate cut for lending interest. He said the central bank would also cut the lending rate in the OMO market to aid institutions.

According to experts, the move will have positive impacts on the monetary market, especially when capital demand is rising significantly to meet consumption and payments given the approachingLunar New Year.

Some commercial banks such as Vietcombank, Agribank and Vietinbank have also announced reductions in their lending interest rates over the past few days, as instructed by the central bank, to spur economic growth.Accordingly, interest rates for short-term dongloans will be lowered to 6 percent per year.
Apart from new loans taken this year, the rate would also apply to existing loans with interest rates higher than 6 percent in five priority sectors of agriculture businesses, firms producing goods for export, small- and medium-sized enterprises, enterprises operating in auxiliary industries and hi-tech enterprises, including startups.

In 2018, the Government aims at an economic growth of 6.7 percent after the local economy expanded by a higher-than-expected 6.81 percent in 2017. Credit growth is set at 17 percent, slowing from 18.17 percent last year. However, the central bank said it will closely monitor the market to make suitable adjustments from time to time.
Source: VNA