Overnight interbank lending rates in Vietnam have recently plummeted to as low as 1%, according to data from the Vietnam Interbank Market Research Association (VIRA). This sharp decline, observed on 29/7 when the average rate hit 1,3% per year, marks a significant shift in the short-term money market. This term accounts for the majority of borrowing transactions between banks, typically used to cover temporary liquidity shortfalls. Despite this, rates for longer terms, from one month onwards, remain stubbornly high at around 7% annually.

The rapid decrease in overnight rates has been particularly noticeable over the past two weeks. After peaking at 13% at the end of last month, the overnight rate first dropped to approximately 6-6,5% at the beginning of this month, settling into the 1-2% range in the last three trading sessions. In contrast, one-week and two-week rates saw slight increases yesterday, reaching 4,6% and 5,7% respectively. The one-month term held steady at 6,9%, showing only a 0,5 percentage point decrease since the beginning of the month.

Speaking to VnExpress, Huynh Thanh Sang, Director of Financial Markets at Asia Commercial Bank (ACB), stated that the swift reduction in overnight rates signals a more positive outlook for the market. This development follows efforts by the State Bank of Vietnam and the Ministry of Finance to increase money supply within the interbank market. Regulatory bodies, for instance, adjusted calculation methods to ensure State Treasury deposits were more comprehensively recorded in banks' liquidity metrics.

However, Sang cautioned that to assess a sustainable trend, closer monitoring of longer-term rates, particularly those from one month onwards, is essential. These rates continue to be anchored at a high level, hovering around 7-7,5% per year, indicating persistent tightness in the broader market.

Interbank interest rates represent the cost at which banks lend to and borrow from each other. These transactions primarily serve to meet short-term liquidity needs, ensure solvency, and fulfill mandatory reserve requirements set by the State Bank of Vietnam. Crucially, this indicator mainly reflects the short-term liquidity status of banks and does not necessarily imply corresponding fluctuations in retail deposit and lending rates for consumers.

Against a backdrop of substantial capital demand for economic projects and ambitious growth targets, Sang observed that the system's current liquidity remains less robust compared to the pre-2022 period. The consistent growth of credit, outpacing deposits from the public, has compelled banks to increasingly rely on non-traditional funding channels. These include foreign borrowing, open market operations (OMO), and State Treasury deposits to address ongoing liquidity shortfalls.

Quynh Trang