Will interest rates of the State Bank be reduced from June 19, 2023 in Vietnam?

Will interest rates of the State Bank be reduced from June 19, 2023 in Vietnam?

On June 16, 2023, the State Bank issued 03 documents on adjusting operating interest rates. Specifically:

Decision 1123/QD-NHNN in 2023 on refinancing interest rate, re-discount interest rate, interest rate on overnight loans in interbank electronic payment and loans for making up fund deficits in clearing payment given by the State Bank of Vietnam to credit Institutions and foreign bank branches. As follows:

- Interest rate on overnight loans in interbank electronic payment and loans for making up fund deficits in clearing payment given by the State Bank of Vietnam to credit Institutions and foreign bank branches decreased from 5.5%/year to 5%/year;

- Refinancing interest rate reduced from 5.0%/year to 4.5%/year;

- re-discount interest rate reduced from 3.5%/year to 3.0%/year.

Decision 1124/QD-NHNN in 2023 on maximum interest rates of deposits in Vietnam Dong (VND) of organizations (except credit institutions and foreign bank branches) and individuals at credit institutions and foreign banks branches according to Circular No. 07/2014/TT-NHNN dated March 17, 2014 are as follows:

1. The maximum interest rate of demand deposits and deposits with a term less than 1 month is 0,5%/year.

2. The maximum interest rate of deposits with a term from 1 month to less than 6 months is 4,75%/year. Particularly, people's credit funds and microfinance institutions shall apply the maximum interest rate of 5,25%/year with respect to deposits with a term from 1 month to less than 6 months.

Decision 1125/QD-NHNN in 2023 on the maximum interest rates of short-term loans in Vietnamese Dong (VND) according to Clause 2 Article 13 of the Circular No. 39/2016/TT-NHNN dated December 30, 2016 are as follows:

1. Credit institutions and foreign bank branches (except for People's Credit Funds and microfinance institutions)  shall grant short-term loans in VND reduce from 4.5%/year to 4.0%/year.

2. People's Credit Funds and microfinance institutions shall grant short-term loans in VND reduce from 5.5%/year to 5.0%/year.

Note: Decision 1123/QD-NHNN in 2023 , Decision 1124/QD-NHNN in 2023 , Decision 1125/QD-NHNN in 2023 took effect from June 19, 2023.

What is interest rate adjusted by the State Bank from June 19, 2023 in Vietnam?

For loan interest rate

Currently, the State Bank stipulates the lending interest rate for 08 loans, specifically:

Short-term loans at credit institutions, foreign bank branches (except for People's Credit Funds and Microfinance Institutions): up to 4.0%/year (Decision 1125/QD-NHNN per year ) 2023 )

Short-term loans at People's Credit Funds and Microfinance Institutions: up to 5.0%/year ( Decision 1125/QD-NHNN 2023 )

Loans for housing support at commercial banks: 5.0%/year (Article 1 of Decision 2081/QD-NHNN in 2022 ).

Preferential loans for purchase, lease-purchase of social housing, new construction or home renovation or repair at the Bank for Social Policies: 4.8%/year (Article 1 Decision 486/QD-TTg ) year 2023 )

Loans to buy social housing, workers' housing with preferential interest rates at Agribank, BIDV, Vietcombank, Vietinbank:

- For the Investor, it is 8.7%/year (Subsection 1.5, Section 1 of Official Dispatch 2308/NHNN-TD in 2023 ).

- For home buyers, the rate is 8.2%/year (Subsection 1.5, Section 1 of Official Dispatch 2308/NHNN-TD in 2023 ).

Refinancing loan in interest rate on overnight loans in interbank electronic payment and loans for making up fund deficits in clearing payment given by the State Bank of Vietnam to credit Institutions and foreign bank branches: 5.0 %/year (Article 1 of Decision 950/QD-NHNN in 2023 )

Re-discount for interest rate on overnight loans in interbank electronic payment and loans for making up fund deficits in clearing payment given by the State Bank of Vietnam to credit Institutions and foreign bank branches: 3.0 %/year ( Decision 1123/QD-NHNN in 2023 ).

Interest rate on overnight loans in interbank electronic payment and loans for making up fund deficits in clearing payment given by the State Bank of Vietnam to credit Institutions and foreign bank branches: 4.5%/year (Decision 1123 / Decision-NHNN year 2023 ).

For deposit interest rate

Accordingly, the State Bank adjusted 04 deposit interest rates, specifically:

Demand deposits and terms of less than 1 month: 0.5%/year ( Decision 1124/QD-NHNN 2023 ).

Deposits with term from 01 month to less than 06 months at banks: 4.75%/year ( Decision 1124/QD-NHNN 2023 ).

Deposits with term from 1 month to less than 6 months at People's Credit Funds and Microfinance Institutions: 5.25%/year ( Decision 1124/QD-NHNN 2023 ).

Deposits in VND will be 0.5%/year at the following institutions (according to Decision 578/QD-NHNN in 2023 ):

- Vietnam Development Bank,

- Bank for Social Policy,

- People's Credit Fund,

- Microfinance institution at the State Bank of Vietnam.

Do credit funds have to publicly list the interest rates on capital mobilization at their institutions in Vietnam?

In Article 91 of the Law on Credit Institutions 2010, there are regulations on interests and charges in business activities of credit institutions as follows:

1. Credit institutions may fix and shall publicize deposit interest rates and service charge rales applied in their business activities.

2. Credit institutions and their clients may agree on interest rates and credit extension charges to be applied to their banking operations according to law.

3. In case banking operations experience abnormal developments, in order to assure safety for the credit institutions system, the State Bank may provide a mechanism for determining charge and interest rates applicable to business activities of credit institutions.

Clause 1, Article 4 of the Law on Credit Institutions 2010 provides:

In this Law. the terms below are construed as follows:

1. Credit institution means an enterprise conducting one. some or all banking operations. Credit institutions include banks, non-bank credit institutions, microfinance institutions and people's credit funds.

2. Bank means a type of credit institution which may conduct all banking operations under this Law. Based on their characteristics and operation objectives, banks include commercial banks, policy banks and cooperative banks.

3. Commercial bank means a type of bank which may conduct all banking operations and other business activities under this Law for profit.

4. Non-bank credit institution means a type of credit institution which may conduct one or some banking operations under this Law, except taking deposits of individuals and providing services of payment via client accounts. Non-bank credit institutions include finance companies, financial leasing companies and other non-bank credit institutions.

Financial leasing company means a type of finance company whose principal operation is financial leasing under this Law.

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According to this Article, credit funds are still considered credit institutions. Therefore, the credit fund must publicly list the capital mobilization interest rate and service provision fee in its business activities in accordance with regulations in Vietnam.

Best regards!