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.
The inter-bank interest rates have sharply declined on all terms. (Photo tinnhanhchungkhoan.vn)
Hanoi (VNS/VNA) -Though Tet (Lunar New Year) isapproaching with rising capital demands, the liquidity of the banking system isabundant, 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 hasborrowed on the open-market-operation (OMO) to date this year because they hadno demand.
This year's liquidity of thebanking system was much better than last year, especially as Tet, which falls on January 25, wasapproaching, Hoan said.
Reports from the State Bank ofVietnam (SBV) showed the inter-bank interest rates have sharply declined on allterms in the past few weeks. By the end of last week, the overnight andone-week rates were 0.94 and 1.46 percent per annum, a fall of 0.98 and 1.08percentage points against the previous week, respectively. The rates fortwo-week and one-month loans also declined by 0.35 and 0.28 percentage pointsto 2.65 and 3.44 percent per year, respectively.
Experts said the increasinginflow of remittances sent to Vietnam by overseas Vietnamese ahead of Tet has replenished the liquidity ofthe banking system, thus resulting in a steep fall in the interbank interestrates in January.
Experts from Bao VietSecurities Joint Stock Company (BVSC) said the SBV’s net purchase of foreign currencieswas around 6 billion USD in the last two months of 2019, increasing thenation’s foreign exchange reserves to approximately 79 billion USD.
They held that a plentifulsupply of money has driven interest rates down ahead of the biggest annualholiday.
Analysts from the MB SecuritiesCompany (MBS) forecast liquidity of the banking system will be positive in 2020as more foreign direct investment will flow into the country that hasfavourable investment policies and attractive labour costs as well as variousbenefits from the US-China trade war.
“We believe the liquidity ofthe banking system will be plentiful in 2020; therefore, the interest rateswill not be affected by external factors,” MBS analysts said.
According to BVSC’s latestreport, interest rates will be stable in 2020; however, it will be hard forthem to fall further in the next few months as the inflation rate is said toshoot up in the first half of 2020, driven by soaring pork and fuel prices./.
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The inter-bank interest rates have sharply declined on all terms. (Photo tinnhanhchungkhoan.vn) 
