Head of Monetary Policy Department of the State Bank Nguyen Ngoc Bao confirmed: “Injecting capital through open market operation is a very normal activity for a central bank to balance supply and demand.”

Some banks report that after the initiative, the inter-bank rate was lowered to below 12 percent for short capital, 11 percent for week capital, and 8.5 percent for overnight loans.

The State Bank aims to bring the inter-bank interest rate down to around 9 percent.

Inter-bank lending rates have been said to illegally rise to 16-17 percent per year for two-week to three-month terms. Normally, the rates were equal to or slightly higher than the refinance interest rate, which currently stands at 8 percent.

Last month, rumours had it that the central bank had pumped about VND30 trillion to support banking liquidity but the central bank denied the bank bailout.

Associate Professor Tran Hoang Ngan from the HCM City Economics University assumed that the lack of liquidity was because banks used up their financial capacity in 2009, especially on the economic stimulus package, and because the speed of capital circulating back to banks remained slow.