Transactions are carried out at Vietcombank. — Photo vtc.vn

HA NOI — Vietcombank today cut its monthly deposit interest rate for the dong to 6 per cent, 1.5 percentage points lower than the ceiling rate stipulated by the State Bank of Viet Nam.

It also slashed the rates for six-month to nine-month terms to 7 per cent (a drop of 0.5 percentage point) while 12 month terms were cut to 8 per cent (a 1 percentage point drop).

This was the second time the bank cut rates within a month and it now offers among the lowest deposit and lending rates of all its competitors, it announced in a press release this morning.

Most other banks currently apply a rate of 7.5 per cent for deposits fewer than 12 months, and 10 per cent for 12 months or more.

Vietcombank general director Nguyen Phuoc Thanh told the press that good deposit growth at the bank and stable liquidity of the banking system drove the rate cuts, which are taking place against a market backdrop of stagnant lending.

Thanh said that the move aimed to stimulate consumption and help firms reduce inventories and improve business results.

"In my opinion, there should be a vanguard bank cutting interest rates. The cuts were not only to meet our internal demand but also to follow Government and central bank directions about helping enterprises access cheaper loans," he said.

Currently at Vietcombank, short-term lending rates are around 10.5 per cent and medium- and long-term lending rates stand at 11.6 per cent, levels which have continued to fall sharply.

The bank is also applying preferential lending programmes, including a VND30 trillion (US$1.4 billion) package with a rate of 7.5 per cent and a $700 million package with a rate of 2 per cent, to assist struggling enterprises.

Thanh said these would affect Vietcombank's business performance in the short term but claimed they were necessary to clear capital flows in the economy. He added that it was difficult to predict the moves of the other banks after today's rate cuts.

"We believe that the market always operates correctly following its rules and no one can stay outside of its circle. Caring for businesses' health is natural and vital for propping up the economy," he declared.

Thanh said that economic conditions still leave room for the State Bank to further reduce the ceiling deposit rate, with inflation being controlled at 6-7 per cent and the consumer price index increasing 2.4 per cent in the first four months of this year. — VNS