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Safe to save even though interest rates drop
Right from the beginning of February 2023, some commercial banks have lowered their savings interest rates from 0.05 to 0.5%. By mid-February, more commercial banks announced to reduce deposit interest rates. Vietnam Technological and Commercial Joint Stock Bank (Techcombank) has sharply reduced the maximum savings deposit interest rate for individual customers from 9.5% per year to 9% per year.
Not only Techcombank, in the interest rate table, applied from mid-February, National Commercial Joint Stock Bank (NCB) has sharply reduced savings interest rates of individual customers, especially with online deposits.
NCB is still offering an interest rate of 6% per year for individual customers with 1-5-month term deposit, which is unchanged from January. However, from 6-month term, the bank's new interest rate table decreased by 0.2-0.8 percentage points compared to the previous month. Similarly, with accumulated savings products, this bank also reduced the interest rate for the 5-year term from 9.7% per year to 8.95% per year and the 1-year term from 9.5% per year down to 9.3% per year.
At Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank), the savings deposit interest rate chart for individual customers applied from February 14 is no longer at rate of 9% per year compare to last month (with both channels of counter and online). Accordingly, the deposit interest rate at Sacombank's counters is currently at 5.5-6% per year with a term of 1-5 months; 8-8.3% per year with term of 6-11 months and 8.4-8.65% per year with term of 12-36 months. Compared to January, interest rates for terms of 6 months or more have all decreased by 0.3-0.5%.
Similarly, with the online channel, the maximum interest rate Sacombank offers in January is 9.2% per year for deposits over 15 months. Up to now, interest rates have decreased to 8.7-8.85% per year. The previous 6-11 months' deposits paid interest at 8.5-9% per year, now reduced to 8.2-8.5% per year; 12-month term decreased from 9.1% per year to 8.6% per year.
From mid-February, savings interest rates at Petrolimex Petroleum Commercial Joint Stock Bank (PGBank) have decreased by 0.3-0.7 percentage points in most terms. In particular, the highest interest rates that PG bank applies to personal deposits has decreased from 9.5% per year (12-18 months term) to 9% per year.
Vietnam Maritime Commercial Joint Stock Bank (MSB) also reduced the deposit interest rate by 0.2-0.4% per year in some terms. With the online channel, the interest rate for 15-36-month term decreased by 0.4% per year to 9% per year. For shorter terms, at 12-month term, deposit interest rate also decreased by 0.4% per year to 8.9% per year, while for 6-11-month term, the interest rate decreased to 8. 8% per years.
Not only the group of commercial banks mentioned above, the group of state-owned banks (Agribank, BIDV, VietinBank, Vietcombank) are also moving to reduce deposit interest rates. Specifically, online deposit interest rates of Vietcombank and Agribank decreased to the level listed at the counter, instead of being higher as before.
Thus, deposit interest rates for terms over 6 months have tended to decrease at some banks over the past time, the reduction level fluctuates around 0.5%.
Currently, the deposit interest rate of banks is still popular at 8-9.5% with ordinary deposits. If compared with the inflation rate, the savings interest rate is still positive, ensuring that depositors still benefit (Consumer Price Index (CPI) in January 2023 increased by 0.52% compared to the previous month and increased by 4.89% over the same period in 2022).
In the last months of 2022, deposits in banks increased sharply due to high interest rates. According to the SBV's statistics, by the end of November 2022, total customer deposits at credit institutions reached more than VND 11.55 million billion, an increase of more than VND 126,600 billion compared to the end of October, the highest month since March 2022.
The trend of cash flow into banks still took place in January and February 2023 even though commercial banks have reduced interest rates. Survey at commercial banks, the number of customers coming to save money is still large. System liquidity is very abundant, most evident in the fact that overnight interbank interest rates have tended to go down. Specifically, in the week of February 6-10, the overnight interbank interest rate fell to over 5% per year, equivalent to a decrease of 1% compared to the end of last week, other terms less than 1 month also decreased from 0.3-0.7%.
Experts predict that in the near future, more banks will announce interest rate cuts. For depositors, in the context of other investment channels facing many difficulties, savings deposit option is a safe and effective solution. Not only because of the positive real interest rate, but also the legitimate interests of depositors are always guaranteed.
“Shock absorber” and depositor trust
When depositing money into insured institutions, deposits of depositors are automatically insured by deposit insurance regulations. Currently, Deposit Insurance of Vietnam (DIV) is protecting deposit of depositors at 1,283 insured institutions (including 97 banks and foreign bank branches, 1,181 people's credit funds, 01 cooperative bank and 04 microfinance institutions).
Under normal conditions, DIV closely follows the establishment and operation of insured institutions. When the the insured institution has problems, DIV participates in special control as well as assists in the recovery process. Moreover, when a bad situation occurs, the insured institution cannot recover to normal operations, the deposit insurance policy acts as a "damping cushion", limiting the damage and loss that the depositor may encounter, the insurance amount shall be refunded according to the coverage limit prescribed by the Prime Minister.
At present, participation in deposit insurance is a mandatory requirement for most credit institutions and foreign bank branches [1] that are entitled to receive deposits from individuals who must participate in deposit insurance. Thereby, deposits of depositors are protected as well as building customer's confidence through deposit insurance, minimizing the consequences of unnecessary risks.
Like some similar cases that happened before, the State Bank of Vietnam's position is very strong and it is clear that this organization will use all measures and policy to protect the legitimate rights and interests of depositors. The State has policies on management and use in order to preserve and grow the capital of the deposit insurance organization. Therefore, people were calmer and feel more secure when depositing money at credit institutions.
In the current situation, in addition to improving standards, operational safety standards, and quality of credit institutions, it is necessary to continue to improve the role of the deposit insurer. Specially, in order to spread the deposit insurance policy to the public, it is necessary to strengthen communication, raise public awareness and confidence about this policy.
The communication of deposit insurance policies should be implemented in parallel with programs to disseminate financial and banking knowledge, thereby improving the public knowledge and skills in accessing and using financial and banking services, towards a good financial community. At the same time, helping the public understand policies, feel secure in banking activities, and increase confidence in the banking system in general are also reducing risks for the deposit insurer. A secure finance system can only be built from a healthy, transparent market and informed financial consumers who are willing to participate in maintaining market discipline.
Currently, the world economic and financial situation is volatile, political tensions persist in some countries...Domestically, investor confidence in the bond market is affected. At the same time, there are many difficulties and challenges for macro management and monetary policy management. Therefore, the preservation and enhancement of depositors' confidence in the banking system is of more concern and needs to be continuously replenished.
[1] Vietnam bank for social policies is not required to participate in deposit insurance because it is a bank under the direct management of the State Bank of Vietnam.
