Central bank to slash USD interest rate, raise confidence on VND VietNamNet Bridge – The State Bank of Vietnam (SBV) said it will slash the deposit dollar interest rates sharply. However, it would keep cautious steps when deciding when and how much to slash the interest rates in order to ensure the liquidity for the banking system. Bankers applaud dollar interest rate reductions   The current ceiling dollar deposit interest rate applied to individual depositors is 2 percent per annum, while the ceiling rate applied to institutional depositors is 0.5 percent only. Meanwhile, the dong deposit interest rates now hover around 6-7 percent per annum. The narrower gap between the dong and the dollar interest rates has helped ease the dollar speculation, because people cannot see big benefits from hoarding dollars and depositing dollars at banks. Sumit Dutta, CEO of the Hong Kong and Shanghai Banking Corporation (HSBC), believes that it is now the right time for the State Bank to lower the dollar deposit interest rates. The inflation rate has been curbed at below 7 percent, while the monetary market has been stabilized, the dong deposit interest rates have decreased and the gold market has become step by step stable. The CEO said a lot of HSBC’s clients have sold dollars to keep dong, which shows the increasingly high confidence of people on the local currency. Citibank Vietnam’s CEO Brett Krause has suggested lowering the dollar deposit interest rate to zero percent in order to completely clear the dollar hoarding. The narrow gap between the dong and the dollar interest rate has helped stabilize the dong/dollar exchange rate over the last 18 months. And it would be unreasonable if the dong deposit interest rates have decreased significantly, while the dollar interest rate stays unchanged. More clients to be subject to dollar loans Brett Krause from Citibank has noted that some clients, who cannot borrow foreign currencies from domestic banks, have to contact foreign banks for loans. Therefore, the central bank, which now strives to boost lending, should expand the subjects to dollar loans. Import companies should be allowed to borrow dollars to import products for domestic sale or import materials for domestic production. Bankers have also suggested raising the ratio a commercial bank can lend to one or a group of enterprises from the current level of no more than 15 percent of the bank’s equity. Truong Van Phuoc, CEO of Eximbank, said the bank’s outstanding loans have increased very slowly by 0.9 percent so far this year. In order to boost lending, Eximbank, like many others, have to slash the lending interest rates to 7-8 percent per annum. However, the banks still face a big barrier that they cannot lend more than 15 percent of their equity to a group of clients Phuoc also thinks that the central bank should “lift the cap” to give commercial banks more opportunities to push up their lending. However, Governor of the State Bank -- Nguyen Van Binh, has told banks to join forces to provide syndicated loans to big clients instead of insisting on a higher cap for the lending proportion, because only the Prime Minister who is on the right position to make such a decision. A report of the HCM City Branch of the State Bank showed that in the first six months of 2013, the outstanding loans in foreign currencies decreased by 2.2 percent, while the foreign currency deposits decreased by 6.77 percent. Phuoc Ha