Many customers when applying for a loan at a bank often hear about it Basic interest rate. This is something that everyone needs to know to make the loan process smooth. However, not everyone knows What is the base interest rate?? What role do they play in the borrowing processes?

What is the base interest rate?
What is the base interest rate?

See more:

  • What is the discount rate?
  • What is the nominal interest rate?
  • What is the interbank rate?

What is the base interest rate?

In order for the bank loan process to be smooth and to meet spending needs, each customer needs to understand the concept of basic interest rates and their importance.

Base interest rate is the lowest interest rate applied at major commercial banks for borrowers of large enterprises who need short-term loans because good customers of the bank are less likely to be able to borrow money. Banks are more likely to default, so banks can charge them interest at a lower rate than the rate charged to customers with a higher probability of default when taking out a loan.

The base interest rate is generally applied, serving as the basis for setting interest rates for other credit services of the bank. Although not specifically listed, the basic interest rate is the basis for lenders to determine and refer to loans for businesses and individuals who borrow unsecured loans. Mortgage loan.

Basis for fixing basic interest rate

The base interest rate is decided by the State Bank based on:

  • Interest rate of the interbank market
  • Operational interest rate on the open market of the State bank
  • Interest rate on mobilizing investment capital from credit institutions
  • Trends of market supply-demand fluctuations
  • Economic situation in the country

What is adjustable interest rate?

Laws on interest rates

According to the provisions of the Civil Code 2015 in Article 468, interest rates are regulated as follows:

Borrowing interest rates shall be agreed upon by the parties.

  • Where the parties have an agreement on the interest rate, the agreed interest rate must not exceed 20%/year of the loan amount, unless otherwise provided for by other relevant laws. Based on the actual situation and at the proposal of the Government, the National Assembly Standing Committee shall decide to adjust the above interest rates and report to the National Assembly at the nearest meeting.
  • In case the agreed interest rate exceeds the limit interest rate specified in this Clause, the excess interest rate will not take effect.

In case the parties have an agreement on interest payment, but the interest rate is not clearly defined and there is a dispute over the interest rate, the interest rate shall be determined equal to 50% of the limit interest rate specified in Clause 1 of this Article at the time of payment. pay.

What is compound interest?

The role of basic interest rate

Basic interest rate not only facilitates business or individual customers installment loan large amount with low interest but also play an important role. Specifically:

Mechanism for credit institutions to fix business interest rates

This interest rate is always transparent and can never be forgotten, so it is the basis for credit institutions to set business interest rates. Because the basic interest rate is always based on the interest rate of the banking market. Accordingly, credit institutions will rely on State bank basic interest rate to determine the interest rate on the loan. Normally, customers are not allowed to lend with interest exceeding 1.5 times.

The basic interest rate is the mechanism for the organization to fix the business interest rate for each customer
The basic interest rate is the mechanism for the organization to fix the business interest rate for each customer

Used for reference and compensation for risks when they occur

In addition, the basic interest rate is also the basis for reference and to compensate the borrower’s risks. In which, the borrower’s default risk will determine the lowest interest rate. Although the element of default is not specifically listed, loans and interest rates are clearly regulated between both lenders and borrowers.

In particular, the base interest rate is taken as a risk premium and must be borne by the borrower. This is also the basis of reputation verification for the bank to know the borrower’s credit history in the most detail.

Most of the interest rates are calculated based on the agreement of the parties but must not exceed the limit prescribed by law. Therefore, the basic interest rate of the State bank is only commonly applied within the scope of credit activities of the State Bank and other credit institutions.

The latest updated basic interest rates at banks today

According to regulations and laws of the State Bank of Vietnam, the basic interest rate is applied on monetary policy and approved for customers who want to borrow in short term. Besides, the interest rate is applied according to each currency unit in the State Bank. Here are the lowest interest rates at banks today:

Basic interest rates applied at domestic banks
Basic interest rates applied at domestic banks

According to Article 1, Decision 2868/QD – NHNN (2010), the basic interest rate in Vietnam dong is 9.0%/year. All basic interest rates at foreign private banks such as Vietcombank, TPBank, Vietinbank, Sacombank and more than 30 large and small domestic banks must be approved by the State Bank in order to apply the official interest rate.

Currently, low interest rates are approved by the State Bank of Vietnam under Decision 402/TB – the State Bank of Vietnam has started to apply it since November 1. In which, the refinancing interest rate is 8%/year and the rediscount interest rate is 6%/year for credit institutions.

In addition, the interest rate applied for electronic payment and clearing of the State Bank of Vietnam is 8%/year, applicable to banks.

Conclude

Here is the information to share, answer questions what is prime interest rate, role and interest rates applied at domestic banks. Hopefully, it will help you gain more knowledge and experience before you have a need to borrow a large amount of money at banks to ensure the best benefits.

Information edited by: banktop.vn

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