Interest rate caps not needed: expertsThe State Bank of Viet Nam should consider developing a roadmap to remove regulations on credit growth limits and interest rate caps as it isn’t suitable due to the country’s achievements in stabilising the nation’s economy, according to experts. As for the management of interest rates, instead of setting a cap for short-term deposits, as currently done, the central bank could regulate by using open-market-operation (OMO), he suggested. At present, Viet Nam still applies an interest rate cap of 5.5 per cent for short-term deposits of 1-6 months. The cap regulation has been imposed since 2010 when commercial banks, especially ailing ones with poor liquidity, took part in a race to increase deposit interest rates to lure depositors, causing a sharp rise in lending interest rates. SBV divides commercial banks into four groups, depending upon their performance in the previous years, to allocate the credit growth quotas.

Source: VietNamNet News May 14, 2018 06:45 UTC