UPDATE 2-Vietnam c.bank moves to help banks cut lending rates

(Adds market reactions paragraphs 7-13)

By Ho Binh Minh

HANOI, Aug 29 (Reuters) - Vietnam's central bank said on Friday it will triple the interest rate on the reserves banks must keep against their dong deposits to 3.6 percent from next month to help banks cut their lending rates.

The State Bank of Vietnam, or the central bank, said in a separate directive, it will keep unchanged the 14-percent base rate for September. The rate has been unchanged since June 11, and banks can lend at up to 21 percent per year.

Commercial banks are required to keep at the central bank 11 percent of their dong and dollar deposits of up to 12 months as from Feb 1, from 10 percent previously, while the reserve ratio for deposits longer than 12 months is 5 percent now.

"The interest rate increase this time is aimed at enabling credit institutions to reduce lending rates, sharing together with enterprises and borrowers," the central bank said in a statement.

On Thursday, Governor Nguyen Van Giau said the requirement on compulsory reserves will not be lowered as the central bank's monetary policy is to help fulfil a government projection to cut inflation down to single digits by the end of 2009.

But its payment of higher interest on the reserves will partly offset the cost of raising funds by commercial banks, thus helping them cut their own rates on dong loans that would ease corporate debt burdens and help expand business.

MARKET RATES EASE