The inter-bank interest rates have sharply declined on all terms. (Photo tinnhanhchungkhoan.vn) Hanoi (VNS/VNA) - Though Tet (Lunar New Year) is approaching with rising capital demands, the liquidity of the banking system is abundant, helping interest rates in the inter-bank market drop sharply, industry insiders said.
According to Hoang Minh Hoan, Deputy General Director of Saigon Commercial Bank, no credit institution has borrowed on the open-market-operation (OMO) to date this year because they had no demand.
This year's liquidity of the banking system was much better than last year, especially as Tet, which falls on January 25, was approaching, Hoan said.
Reports from the State Bank of Vietnam (SBV) showed the inter-bank interest rates have sharply declined on all terms in the past few weeks. By the end of last week, the overnight and one-week rates were 0.94 and 1.46 percent per annum, a fall of 0.98 and 1.08 percentage points against the previous week, respectively. The rates for two-week and one-month loans also declined by 0.35 and 0.28 percentage points to 2.65 and 3.44 percent per year, respectively.
Experts said the increasing inflow of remittances sent to Vietnam by overseas Vietnamese ahead of Tet has replenished the liquidity of the banking system, thus resulting in a steep fall in the interbank interest rates in January.
Experts from Bao Viet Securities Joint Stock Company (BVSC) said the SBV’s net purchase of foreign currencies was around 6 billion USD in the last two months of 2019, increasing the nation’s foreign exchange reserves to approximately 79 billion USD.
They held that a plentiful supply of money has driven interest rates down ahead of the biggest annual holiday.
Analysts from the MB Securities Company (MBS) forecast liquidity of the banking system will be positive in 2020 as more foreign direct investment will flow into the country that has favourable investment policies and attractive labour costs as well as various benefits from the US-China trade war.
“We believe the liquidity of the banking system will be plentiful in 2020; therefore, the interest rates will not be affected by external factors,” MBS analysts said.
According to BVSC’s latest report, interest rates will be stable in 2020; however, it will be hard for them to fall further in the next few months as the inflation rate is said to shoot up in the first half of 2020, driven by soaring pork and fuel prices./.
VNA
