Interest rates fall after fund injection
Interbank lending rates have fallen on improved liquidity since the State Bank of Vietnam injected more funds into the banking system on Wednesday, Lao Dong newspaper reported Friday.
The overnight interbank rate fell to 8.5 percent a year from 10.69 percent at the end of December, the report said. The one-week rate declined slightly to 11 percent from more than 11.5 percent earlier.
The central bank had pumped about VND15 trillion (US$812 million) into the money market this week to help boost bank liquidity, Lao Dong reported, citing an unidentified source.
The liquidity issue has been raised several times by bankers and experts since the middle of last year. Some lenders are even breaking the law by raising their deposit rates above the centralbankâs rate cap of 10.49 percent to attract funds.
But economist Le Tham Duong of the Ho Chi Minh City Banking University told Thanh Nien that increasing deposit rates was not the right way to improve liquidity. Instead, lenders should keep the balance between loans and deposits in check to ensure liquidity.
Many banks have poor asset management and do not want to invest in government bonds, a financial instrument that can be used as collateral to increaseliquidity any time, Le Xuan Nghia, Hanoi-based vice chairman of the National Financial Supervision Commission, was cited by local news website VietNamNet as saying on Friday.
Nghia also said that liquidity problems had been furthered by the fact that banks have been using more short-term funds to offer long-term loans than they should.
Source: Thanh Nien
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