The State Bank of Vietnam (SBV) injected more than 5.09 trillion Vietnamese Dong ($3.2 trillion) into the banking system through open market operation channels to support capitalization for commercial banks.
During the SBV offering through the mortgaged securities, a commercial bank borrowed more than the amount of SBV offered with reference to a seven-day interest rate of four percent per annum.
The loan was the first time since early 2024 when banks needed such a large amount of funds through SBVs. In January 2023, winning bids in the open market operation channel were only worth 1-2 billion Vietnamese Dong (US$635 million-1.3 billion).
The move was quite unexpected given that the peak payment period ahead of the Lunar New Year had passed.
In the interbank market, interest rates also increased again after two sessions of deep declines.
The latest data released by the SBV showed the average overnight interbank rate for Dong-denominated loans on February 19 this year increased to 1.41 percent from 1.04 percent at the end of last week.
The rise in interbank rates accompanied by high transaction turnover shows that demand for credit among commercial banks remains large, even though the peak payment period ahead of Chinese New Year has passed.
Earlier, interbank rates continued to rise ahead of the Lunar New Year. Overnight rates jumped from 0.12 percent per annum on January 29, 2024 to 2.38 percent on February 6 and 7, 2024.
That percentage is equivalent to a nearly 20-fold jump within one year.
According to experts, the sharp increase in interbank rates in the short term is mainly due to seasonal factors when payment demand increases ahead of the New Year.
To support commercial banks’ liquidity demand, the SBV always maintains bidding in the open market operation channel and adjusts the bidding period to 14 days ahead of the Lunar New Year holiday.
However, in the period before the Lunar New Year, no banks required SBV capital resources.