BIDV to cut lending rates to boost economy

State-run BIDV, Vietnam's second-largest bank, said on Friday it would cut dong lending rates by up to 1.6 percentage points from Monday in response to government measures to try to prevent an economic downturn.

The unlisted Hanoi-based Bank for Investment and Development of Viet Nam would cut short-term dong loans to 13% from 14%, it said in a statement sent to Reuters regarding its ninth rate cut in the past four months.

Businesses in energy, steel, cement, fertiliser and medicine sectors would pay 11.4% for dong loans instead of the current 13%, it said. The new rate of 11.4% would be the lowest on the domestic market.

Facing a growing global slowdown, the Vietnamese government has adopted aggressive measures to maintain economic growth. On Friday a report said the cabinet wanted banks to slash their lending rates.

The State Bank of Viet Nam has cut benchmark interest rates three times since Oct. 21, and more cuts are expected.

On Tuesday, HSBC economist Prakriti Sofat forecast the Vietnamese central bank would cut the base rate by as much as 2 percentage points by the year end, from 11 percent now.

BIDV's last dong rate cut, on Nov. 20, came out minutes before the State Bank of Vietnam announced benchmark rate cuts.

Prime Minister Nguyen Tan Dung has said more rate cuts could be in store in 2009.

The central bank declined to comment. (Reuters)