The ceiling on 1-month terms has also been cut by 0.2 percentage points from 1.0 percent per annum, the SBV said in a statement late Monday.

The SBV has also cut the short-term lending rate for small and medium-sized enterprises, agriculture, rural development, and supporting industries from 6.5 percent per annum to 6 percent to support growth, it added.

Microfinance institutions are allowed maximum deposit and lending rates of 6.5 percent and 7 percent per annum respectively for terms lower than 6 months, although these have both been slashed 0.5 percentage points in the same move.

Banks are still free to set interest rates for terms above 6 months, the SBV said.

The same day, several local banks announced they were slashing deposit rates across various terms.

Vietcombank and VietinBank, two of Vietnam’s "Big 4" state-owned lenders, which are the four banks with the highest total assets, reduced deposit rates by 0.2 percentage points for term deposits of under 9 months.

Mid-sized lenders, including Military Bank, TPBank and Eximbank, VietCapital Bank have also announced reducing their deposit rates by 0.1-0.2 percentage points on short-term deposits.

According to Saigon Securities Inc., although banks have announced slight adjustments to their interest rates, actual short-term rates will still be dependent heavily on seasonal demand, which often surges by the end of the year.

Following the news of simultaneous interest rate cuts, Vietnam’s benchmark VN-Index fell 0.7 percent to 1,002.91 points Monday afternoon, the steepest losing session in close to three months, with blue-chips and banking stocks being the biggest drag on the market.