Vietnam banks cut six-month deposit rates to 7%

The six-month deposit interest rates at banks in Vietnam, barring some outliers, fell to a maximum of 7% starting Wednesday.

The banks offering 7% interest on six-month deposits include VietABank, National Citizen Bank (NCB), PVCombank and ABBank.

DongA Bank is offering 6.35%, but has a promotion of an additional 1.1-1.2 percentage points for six-month, 12-month and 13-month deposits of VND200 million ($8,350) or more. As a result, the interest rates at the private lender exceed 7% in several cases.

A few banks are quoting rates of 6% or lower, like Techcombank at 5.8% under its normal program and 6% for its special program; SeABank at 5.7%; and MBBank at 6%.

The lowest rate is 5% offered by state-controlled Agribank, BIDV, VietinBank and Vietcombank, also known as the “Big 4” banks in Vietnam.

For 12-month terms, the deposit interest rates are lowest at Techcombank with 5.9% under its normal program and 6.3% at the “Big 4” lenders.

On Monday, the State Bank of Vietnam (SBV) asked banks in the country, both domestic and foreign, to further lower lending rates by 1.5-2 percentage points per annum to better support the country’s economic growth.

The SBV required banks to submit reports on their 2023 rate cut commitments for outstanding and new loans by August 25. The deadline for reports regarding lowered rates on loans is January 8, 2024.

Several economists maintain that current lending rates in Vietnam are still high, making businesses reluctant to apply for loans, thereby reducing credit supply.

"GDP growth at current prices is somewhere around 7%, while money supply growth is only 3%," economist Le Xuan Nghia told The Investor. Assuming that current inflation is 4%, deposit rates should be 6% per annum or so, therefore lending rates should be around 8% per annum, he said.

At an August 3 meeting between property developers and Prime Minister Pham Minh Chinh, Le Tu Minh, chairman of IMG Investment JSC, said: "It's time to cut medium-term lending rates below 10%. With rates higher than 10%, no economy can be healthy."

The SBV has cut policy interest rates four times this year, by 150 basis points to 4.5% for the refinancing rate. The latest took place on June 19.

These policy rate cuts prompted local commercial banks to lower their deposit and lending rates. Deposit rates on the country are down about 150 basis points year to date.