Interbank interest rate up to 13%

According to data from the Interbank Market Research Association (VIRA), interbank interest rates increased sharply on June 30 after about two weeks of maintaining at a low level.

The average interest rate for overnight terms – the main borrowing term in the interbank market – increased to 13% while in previous sessions it fluctuated between 4-6%. One-week, two-week and one-month terms also increased by 8-8.5%.

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.

Since the end of last year until now, lending interest rates between banks have increased sharply in many sessions. According to experts, increased pressure on liquidity and capital balance makes some banks rely more on capital sources in the interbank market, thereby pushing up interest rates in this market.

Interbank interest rates mainly reflect short-term liquidity fluctuations of the system. If this situation lasts, the deposit and lending interest rates in the market may be under increasing pressure.

On June 30, the State Bank of June 30 injected money through the open market channel (OMO) to support system liquidity.

The State Bank on the same day offered a bid of VND 38,000 billion on the valuable paper mortgage channel with an interest rate of 4.5%. This is the operation of the State Bank of Vietnam providing short-term loans to banks with valuable papers as collateral. Banks borrowed nearly 31,600 billion VND through this channel while 17,000 billion VND of old loans due were repaid. Thereby, the operator net injected nearly 14,600 billion VND into the system. The State Bank does not issue bills to absorb liquidity.

On June 29, the State Bank also opened a 7-day USD/VND swap operation with banks. The transaction was carried out on June 30, whereby the operator purchased spot USD from banks and temporarily injected the corresponding amount of dong into the system. After 7 days, the State Bank will resell the USD and reclaim the dong.