According to statistics of Bao Viet Securities Company (BVSC), in the week of March 9th 13th, the State Bank of Vietnam (SBV) net withdrew two trillion dong via the Open Market Operation (OMO). Particularly, the SBV newly issued two trillion dong of bills with a term of 91 days and interest rate maintained at 2.65%; while no bills matured in the week. On the OMO channel, there was no new issuance and no maturity. Thus, the amount of bills in circulartion has reached 147 trillion dong.
On March 16th, the SBV lowered refinancing rate, rediscount rate and OMO rate by 0.5%. According to BVSC, the SBV’s interest rate cut and the stop of net withdrawal will help make the liquidity of the interbank system more abundant and help support capital for commercial banks in difficult times due to the Covid-19 epidemic.
The interbank interest rates in the week increased on all terms of overnight, one week and two weeks with an increase of respectively 0.47%, 0.44 percent and 0.51 percent to respectively 2.48%, 2.6 percent and 2.75 percent per annum. The interbank rates are forecasted to decline in the next week when the SBV lowered refinancing, rediscount and OMO interest rates.
Notbaly, the SBV also reduced the ceiling of short-term deposit interest rates (one to six months) by 0.25 percent from five percent to 4.75 percent per annum. This reduction level, according to BVSC, is fairly modest since Vietnam’s inflation by the end of Febraury was relatively high at over five percent. Therefore, the SBV has not yet been able to strongly reduce the deposit interest rate cap due to the concerns about affecting savings capital source.
Nevertheless, with the current supply-demand movements of goods which is affected by the ongoing epidemic, Vietnam’s inflation is likely to decline in the comong months, thereby creating favourable conditions for the SBV to continue cutting short-term deposit rate capital when necessary.
The lending interest rates for priority areas were also further cut by 0.5 percent from six percent to 5.5 percent per annum. Compared to the decrease in deposit interest rate cap, the reduction of ceiling lending interest rate to priority areas is 0.25 percent higher. This may more or less affect banks’ Net Interest Margin (NIM) of banks in the near future.
