From the beginning of the year until now, interest rates in the interbank market have fluctuated sharply. On 4/2, the overnight rate surged to 17%, its highest level in about a decade. In March, the market recorded many sessions where rates exceeded 10% before cooling down. By early April, the overnight rate still hovered around 9%.
Unlike deposit rates from the public, this refers to borrowing rates between credit institutions, primarily serving short-term liquidity needs within the system.
The sharp increase in interbank interest rates reflects growing liquidity pressure that began in late last year. Following a period of rapid credit expansion, loan balances at many banks exceeded deposit volumes. The loan-to-deposit ratio at many financial institutions surpassed 100% and showed an increasing trend compared to early 2025.
This situation forced some banks to borrow from the interbank market at higher costs.
According to an assessment by analysts at Vietcombank Securities (VCBS), liquidity and capital balance pressure on the banking system intensified from the second half of 2025, especially among small and medium-sized commercial banks.
"As their ability to absorb short-term shocks declined, these banks became more reliant on interbank market funding, thereby pushing up overall interest rates," VCBS noted.
Additionally, the slow movement of funds within the system from banks with surpluses to those with deficits caused "local congestion" to persist for several months, increasing the demand for interbank borrowing among credit institutions.
Beyond internal factors, exchange rate management policies also influenced system liquidity.
Recently, the State Bank of Vietnam (SBV) began selling 180-day forward USD to credit institutions at VND 26,850 per USD to stabilize the exchange rate amidst a strengthening US dollar due to geopolitical tensions.
According to Nguyen Hoan Nien, an analyst at Shinhan Securities, this measure helps alleviate exchange rate pressure but simultaneously "locks up" a significant amount of Vietnamese dong liquidity within the system. This contraction in liquidity contributed to the rise in interbank interest rates.
Despite this, the expert believes that interbank interest rates primarily reflect immediate liquidity fluctuations. Only when these fluctuations are prolonged and form a clear trend can their long-term impact on overall market interest rates be assessed.
"Borrowing rates among banks reflect liquidity pressure but do not necessarily lead to an increase in deposit rates," Nien stated.
In reality, the relationship between interbank rates and retail deposit rates in Vietnam does not always follow a unidirectional rule as in economic theory. In some periods, deposit rates may increase first, then inversely affecting the interbank market, Nien observed.
This unique characteristic stems from the structure of the domestic banking system, where interest income still accounts for a large proportion, about 70-80%, significantly higher than the approximately 30% seen in foreign banks. Furthermore, administrative interventions such as interest rate caps or operational guidance also complicate the connection between the two markets.
The most significant impact of the recent sharp fluctuations in interbank interest rates, according to Nien, is the pressure on banks' net interest margin (NIM) as funding costs rise. This will compel some banks to diversify their revenue streams, such as boosting consumer lending or expanding investment and service activities.
Shinhan Securities' expert predicts that interbank interest rates are unlikely to fall significantly in the near future, possibly maintaining around 6.8-7% for a one-month term. Meanwhile, retail deposit rates are forecast to range from 7-9% annually, depending on the bank.
Amidst local liquidity congestion and reduced policy maneuvering room due to exchange rate pressure, overall interest rates are not expected to return to previous low levels soon.
Quynh Trang
