Interbank interest rates dropped to the lowest at the beginning of the year

According to data from the Interbank Market Research Association (Vira), the lending interest rate between banks on July 28 was at 2.2% per year. This is the second consecutive session that overnight interest rates – the term that accounts for the majority of transactions – are anchored at the lowest level since the beginning of the year.

At longer terms, the interest rate for one week is 4.55%, two weeks 5.3% and one month 6.9%.

Overnight lending interest rates among banks have been on a downward trend for the past month. From 13% at the end of June, this interest rate dropped to around 6-6.7% per year at the beginning of this month. The downward trend has been more obvious in the last two weeks, when interest rates dropped below 4% and then returned to around 2% per year.

According to data from the State Bank, on average in July, banks borrowed about VND 850,000 billion from each other overnight each session, higher than the average of VND 800,000 billion in the previous month.

Interbank interest rate is the interest rate at which banks borrow from each other to meet short-term liquidity needs, ensure solvency and mandatory reserve requirements at the State Bank. This interest rate mainly reflects short-term liquidity fluctuations of the system.

The fact that banks lend to each other at lower interest rates partly shows that short-term liquidity has improved, thereby helping to reduce capital costs. However, according to experts, this development may not have a direct impact on deposit and lending interest rates in the residential market but needs further observation.

Also in the July 28 session, on the open market, the State Bank offered a total of VND 7,000 billion through the term purchase of valuable papers for terms of 7, 42 and 63 days, with the same interest rate of 4.5% per year. Members won nearly 5,660 billion VND, while more than 7,621 billion VND of capital is due. The operator therefore net withdrew about 1,961 billion VND, bringing the amount of capital circulating on this channel to more than 144,058 billion VND.