Interbank interest rates fall to historic lows

According to data from the State Bank of Vietnam (SBV), the average overnight interbank VND lending interest rate (the main term accounts for about 90-95% of transaction value) as of July 14 has decreased to 0.14%/year. This is the lowest overnight interest rate since the end of January 2021.

Thus, interbank overnight interest rates have now fallen to the historical bottom (0.1 - 0.2%/year) set in the second half of 2020.

Not only overnight interest rates but also interbank interest rates for other short terms have decreased sharply.

On July 14, interbank interest rates for two other key terms, 1 week and 2 weeks, fell to 0.32%/year and 0.49%/year. These are both the lowest levels in the past 2.5 years.

Interbank interest rates drop sharply (Source: SBV)

Interbank interest rates for 1-month, 3-month, 6-month and 9-month terms as of July 14 were 2.3%/year, 4.46%/year, 6.84%/year and 7.93%/year, respectively.

The rapid decrease in interbank interest rates shows that liquidity in the banking system is quite abundant and borrowing costs between banks are very cheap.

SSI Research said that during the week of July 10-14, the State Bank only offered VND15,000 billion on the 7-day term channel, but no member needed this liquidity support package. This shows the excess liquidity.

Interbank interest rates have fallen sharply after two consecutive reductions in operating interest rates in less than a month by the State Bank of Vietnam.

After 4 reductions, many operating interest rates have decreased by a total of 1.5 - 2 percentage points and erased almost all of the increases in the 2 adjustments in 2022.

At the Government press conference on the afternoon of July 4, Deputy Governor of the State Bank of Vietnam Dao Minh Tu said that the current lending interest rate under open market operations is only 4%/year, OMO lending or lending to cover the shortfall in the temporary calculations of commercial banks, overnight lending is only 5%.

These two loans are mostly for commercial banks that have excess liquidity and are not interested in the State Bank's loans because these are the last loans that commercial banks need to enjoy the State Bank's resources.

According to the leader of the State Bank, liquidity of commercial banks is in excess due to slow credit growth.

According to the State Bank of Vietnam, credit growth in the entire economy by the end of June only reached 4.73%, much lower than the same period last year.

Deputy Governor: Interest rates will continue to decrease According to Deputy Governor of the State Bank of Vietnam Dao Minh Tu, with the impact of policy lag, it is expected that lending interest rates for the economy will continue to decrease in the coming time.

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