From June 19, 2023, the refinancing interest rate in Vietnam is 4.5%/year

From June 19, 2023, the refinancing interest rate in Vietnam is 4.5%/year (Internet image)

On June 16, 2023, the State Bank of issued Decision 1123/QD-NHNN 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.

The State Bank of Vietnam has adjusted the relevant interest rates in Decision 1123/QD-NHNN as follows:

1. From June 19, 2023, the refinancing interest rate in Vietnam is 4.5%/year

Specifically, the interest rates of the State Bank of Vietnam are as follows:

- Refinancing interest rate: 4.5%/year.

- Re-discount interest rate: 3.0%/year.

- IInterest 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.

According to Decision 950/QD-NHNN dated May 23, 2023, the interest rates of the State Bank of Vietnam are as follows:

- Refinancing interest rate: 5,0%/year.

- Re-discount interest rate: 3,5%/year.

- 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: 5,5%/year.

Thus, from June 19, 2023, the refinancing interest rate will decrease from 5.0%/year to 4.5%/year (ie 0.5%/year decrease compared to Decision 950/QD-NHNN), the remaining interest rates are also reduced compared to the provisions specified in Decision 950/QD-NHNN

Decision 1123/QD-NHNN takes effect as of 19/06/2023 and replaces Decision 950/QD-NHNN from 23/5/2023.

2. What is the refinancing interest rate?

According to the Law on the State Bank of Vietnam 2010, re-financing means a form of extending credits by the State Bank, aiming to provide short-term capital and payment instruments for credit institutions.

The State Bank shall provide for and effect the re-financing to credit institutions in the following forms:

- Granting loans secured by the pledge of valuable papers;

- Discounting valuable papers;

- Other forms.

Refinancing interest rate is the interest rate that the State bank applies to refinancing operations for commercial banks

The Stale Bank shall announce the re­financing interest rate, prime interest rate and other interest rates to serve the regulation of the monetary policy and the fight against usury.

In case abnormal developments are seen in the monetary market, the State Bank shall provide for a mechanism for regulating interest rates applicable to credit institutions in their relations with others and their clients and in other credit relations.

3. Tasks and powers of the State Bank of Vietnam

According to Article 4 of the Law on the State Bank of Vietnam 2010, the State Bank of Vietnam has the following duties and powers:

- To conduct operations for the purpose of currency value stability; to assure the safety for banking operations and the system of credit institutions; to assure the safety and effectiveness of the national payment system; and to contribute to accelerating socio-economic development along the socialist orientation.

- To participate in the elaboration of national socio-economic development strategies and plans.

- To elaborate banking development strategies for submission to competent state agencies for approval, and organize the implementation of these strategies.

- To promulgate or propose competent state agencies to promulgate legal documents on monetary and banking matters; to propagate, disseminate and examine legal documents on monetary and banking matters according to its competence.

- To determine annual inflation rate targets for submission by the Government to the National Assembly for decision, and organize the realization thereof.

- To organize, regulate and develop the monetary market.

- To organize a monetary and banking statistics and forecast system; to publicize monetary and banking information according to law.

- To organize the printing, minting, preservation and transportation of banknotes and coins: and to conduct operations of issuing, withdrawing, replacing and destroying banknotes and coins.

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