HCMC – Vietnam’s interbank interest rates have edged up further due to the central bank’s net cash withdrawals from the banking system.

The interbank rates for all tenors have risen, with the overnight rate increasing by 1.4 percentage points to 6%, according to a recent market report by SSI Research.

The interest rate surge resulted from the continuous net cash withdrawals by the State Bank of Vietnam (SBV) from the system recently.

Last week, the SBV, the country’s central bank, drained VND140,550 billion via sales of treasury bills with terms of seven days and 91 days, leading to net withdrawals of VND43,700 billion.

“The withdrawal showed the SBV’s intention to drive the interbank rate benchmark higher than the U.S. federal funds rate. It aimed to create a safe gap between the Vietnamese interbank rates and the Fed funds rates in preparation for the Federal Reserve meeting to be held in March,” SSI Research said.

The interbank rate is the rate charged on short-term loans made among banks. A high interbank rate suggests a liquidity problem in the banking system and may exert pressure on deposit and lending rates at commercial banks.

Currently, the lending rates for businesses hover around 10-10.5% a year for six-month tenors and 11-12% for 12-month terms, while interest rates for consumer loans have climbed to 14-16% annually.