Illustrative photo (Source: cafef.vn) Hanoi (VNS/VNA ) - The liquidity of the banking system has risen recently, helping cool interbank interest rates.
According to the State Bank of Vietnam (SBV), the averageovernight interest rate in the trading session ending last week was only 0.92percent per year, against 1.21 percent in May. The rate for one-week loans was1.16 percent, compared with 1.35 percent in May.
The good liquidity was thanks to a large amount ofmoney the SBV pumped into the market through the purchase of US dollars fromcommercial banks.
In a recent money market report, Saigon SecuritiesIncorporation (SSI) reported about 75 percent of foreign currency salescontracts have expired to date this year and the remaining contracts willexpire in August. Accordingly, the SBV will have to pump about 157 trillion VND into the market to buy foreign currency.
According to SSI's estimates, commercial bankssold a foreign currency amount of nearly 7 billion USD with a 6-month term tothe SBV at the beginning of this year.
A recent report of Vietcombank Securities Company(VCBS) also stated that the liquidity of the banking system in this period isexpected to be more abundant than in the previous quarter when the SBVpurchases the dollars following the expiry date of foreign currency contracts.
According to VCBS, the bright spot at this timecontinues to come from the fact that capital flows choose Vietnam as aninvestment destination with the registered and disbursed FDI capital still onan increasing trend.
The Government’s target of stabilising inflationis being met, and there is still room for controlling inflation.
These factors would help increase interbankliquidity, thereby bringing interest rates down again in August, VCBS said.
While the liquidity of the banking system isabundant, lending is showing signs of slowing down due to the impact of theCOVID-19 pandemic, with many cities and provinces having to implement socialdistancing measures.
According to a report of the SBV’s HCM Citybranch, credit last month only increased by about 0.56 percent compared to theprevious month. The average credit increase in the previous monthswas more than 1 percent. The city's total outstanding loans at the end ofJuly was estimated at 2.69 quadrillion VND, up 6.2 percent compared to the endof 2020.
The deposit growth at the city’s banks in theperiod also showed signs of slowing. The total mobilised capital of banks inthe city at the end of July was estimated at more than 3.02 quadrillion VND, uponly 0.5 percent compared to the previous month and 4 percent compared to theend of 2020.
As the latest outbreak of COVID-19 is causing manydifficulties for production and business, SSI believes the SBV would continueto maintain the current monetary policy in the direction of supporting growthand firms.
“The monetary policy might be continually loosenedif the pandemic becomes more complicated and lasts longer than expected,” SSInoted./.
VNA
