•  State Bank targets lower rates

The cap on interest rates for non-term deposits in Vietnamese dong will fall to 4 percent from the existing 5 percent.

On the same day, SBV Governor Nguyen Van Binh also signed Decision 693/QD-NHNN regarding re-financing, discounts and overnight interest rates on the inter-bank market.

The re-financing interest rate has been set at 13 percent per year, the discount interest rate at 11 percent and overnight interest rate at 14 percent.

At the end of last week, Vietinbank lowered its annual lending interest rate from 15 percent to 14 percent.

The new rate will apply to the export, agricultural and rural development sectors, as well as supporting industries and small-and medium-sized enterprises.

An annual interest rate of 12 percent will also be applied to traders wishing to purchase rice from the 2011-12 winter-spring harvest to hold in reserve, Vietinbank said.

Meanwhile, the Cuu Long (Mekong) Delta Housing Development Bank said it has earmarked reserves of VND3 trillion (US$142 million) to lend to domestic producers at 1 percent to 2 percent below its annual market rate.

Eximbank has also set aside VND1 trillion (US$44 million) for preferential loans over a six-month period for family-run businesses that had been in operation for at least three years.

This will be the third reduction in lending interest rates by domestic banks since March 12 to help firms more easily access credit.

A meeting between the SBV and 12 major commercial banks (G12) in Hanoi last week heard that the lending proportion out of total deposits in the first two months of the year reduced to 96.4 percent from 116 percent in the fourth quarter last year, which indicated improved liquidity.

However, commercial banks said they are unable to lend more due to a cap on their credit growth.