SBV moots measures to inject capital into the economy
SBV moots measures to inject capital into the economy
Lowering deposit rate to 9pct p.a and establishing the state-owned debt trading company are among remedies put forward at the meeting of 14 largest banks held by the central bank early 31 May.
The banking sector except several feeble ones particularly the 14 largest lenders “G14″ are now enjoying many positive indicators such as surplus liquidity. The statistics as of the end of May released by SBV at the meeting revealed commercial banks’ compulsory deposit reserve ratios at this agency exceeding the requirement level by 40 trillion dong.
The foreign exchange rate movements and the balance of payment have implied stable tendency that is forecast to stay for a long time. The domestic gold price is still 2 million dong per tael higher than the world price, yet the negative implications on the foreign currency market have been almost negligible.
However, the whole industry’s credit growth has been negative 0.2pct over the end of last year, according to the workshop.
With a view to facilitate the government’s growth goals, the central bank proposed several drastic measures.
Firstly, short-term ceiling deposit interest rate will be lowered to 9pct, which could be the final adjustment till the year end whereas lending rate may be capped at 12pct-13pct. What is noteworthy is this maximum deposit rate merely applies to short terms of below one year and negotiable rates are allowed for medium and long terms.
Yet, small lenders of liquidity shortage that are almost unable to access funds in the secondary market due to the lost confidence could have short-term deposits converted into medium and long-term ones to attract capital, which would provoke the return of market uncertainty.
Secondly, privileged sectors such as agriculture will enjoy further refinancing.
Thirdly, credit institutions are requested to adjust interest rates for current loan agreements so as to ease customers’ difficulties and to apply flexible credit conditions that still meet credit standards.
Fourthly, a debt trading company is expected to appear in order to tackle the sector’s bad debts. As such, further capital will be channelled into the economy making the capital flow between banks and businesses smoother.
Lastly, a support fund for low-income home buyers could be established in an attempt to partly boost up the freezing real estate market as well as to bring about social security.
Such measures are expected to gradually facilitate the capital flow between credit institutions and enterprises, yet the consequences remain unknown. Some experts presumed them necessary yet situational remedies and what matters is rebuild the market’s confidence.
VnEconomy
