Vietnam will double the levels of compulsory reserves that foreign and domestic banks must keep with the central bank in dong from June 1, a move aimed at reining in inflation, the central bank said.
A central bank directive signed on Monday boosted reserve requirements to 10% on deposits with terms of up to 12 months, from 5% that had been in effect since July 1, 2004.
Vietnam's consumer price inflation in May accelerated to 7.31% from a year earlier on higher fuel and food costs, up from 7.16% in April, the government said last week.
The rise is above a government target to keep annual inflation this year at less than 7 percent. The central bank's reserve requirement forces commercial banks to set aside more dong, reducing the cash that could otherwise be loaned, bankers said.
"The move will reduce banks' liquidity but interest rates would not change as banks still have funds in surplus," a dealer at a foreign bank branch in Ho Chi Minh City said.
Four state-run banks offered their overnight dong loans at 3.5-4% on Wednesday, unchanged in the past 10 days. Bankers said steady rates suggested funds in the banking system remained at a healthy level.
Vietnam has more than 40 commercial banks, but five state-run banks control more than 70 percent of lending. Besides, branches of 35 foreign banks and six joint venture banks operate in the country.
Source: Reuters
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