Vietnam Central Bank Slashes Reserve Ratios for Some Banks that Lend to Agriculture

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Dec. 15 – Vietnam’s Central Bank said Thursday that it was cutting the reserve ratios of five lenders that all have a large amount of capital loaned to the country’s agricultural sector.

The central bank said the reserve ratios of the country’s top lenders Agribank, Vietnam International Bank, Kien Long Bank and Mekong Housing Bank would be cut to one-fifth of the current level. Agribank’s current reserve ratio requirement is 1 percent. But bankers say that ratios differ from bank to bank and from one type of capital to another.

The central bank also said the government-administered Central People’s Credit Fund would cut its normal reserve ratio by 1/20. Previously, the central bank in October cut reserve ratios for unspecified banks and institutions that lent to the agriculture sector.

The measures come in the wake of recent criticisms by international organizations, including the International Monetary Fund and World Bank, that charge Vietnam with promoting too loose of a monetary policy.

Credit grew this year 25 percent to 27 percent, Vietnam’s Central Bank Governor Nguyen Van Giau said this week. The IMF said the targeted rate of 25 percent was too high for the economy and future measures should be taken to ease lending and limit inflation.

Nevertheless, 70 percent of Vietnam’s 86 million people live in the countryside, and spurring rapid development in that region remains a priority for Vietnam’s government.

A statement on the State Bank of Vietnam’s web site said the new reserve ratios were taking effect in December.