Vietnam banks en masse cut deposit interest rates following PM instruction

As many as 12 banks in Vietnam have reduced their deposit interest rates by an average of 0.7 percentage points, according to Deputy Governor of the State Bank of Vietnam (SBV) Dao Minh Tu.

The move followed Prime Minister Pham Minh Chinh requesting the SBV, the country's central bank, to "immediately inspect banks that have lifted their deposit rates", a driver of increased lending rates, on February 24.

After the Lunar New Year (Tet) holiday, many people deposited large amounts of money, driving eight banks to raise deposit rates for certain terms to attract capital.

However, following the Prime Minister's direction, the central bank instructed these commercial banks to cut deposit rates and all of them did so, Tu told the government’s monthly press meeting on Wednesday.

About 12 others have slashed their deposit interest rates by an average of 0.7 percentage points.

Currently, most deposit interest rates in the system are below 6% per annum for a 12-month term, with rates for 6-9 month terms ranging from 4.8% to 5.8%.

Banks have also introduced preferential loan packages for consumption and housing to poor and low-income individuals.

"The central bank’s stance is to create favorable conditions for businesses to borrow at appropriate interest rates," Tu noted, adding that the rate reduction was aimed at stabilizing the market and creating conditions for lower lending rates.

According to the deputy governor, the central bank will closely monitor capital mobilization and lending activities as the banking sector must share the burden with businesses by reducing costs and loan interest rates across all terms.

He confirmed the SBV will use its policy tools to ensure commercial banks have sufficient liquidity and capital to operate, rather than increasing deposit rates which would lead to higher loan interest rates.

Last year, the average deposit interest rate across the banking system decreased by about 1.1 ppts compared to the end of 2023. In particular, state-owned commercial banks reduced their interest rates by 1.6 ppts, according to an SBV report.

The government plans to achieve a GDP growth rate of at least 8% this year, laying the foundation for double-digit expansion from 2026 to 2030. To this end, Vietnam needs to mobilize more than VND4,000 trillion (around $160 billion).

Bank credit remains a crucial source of funding for the economy. According to Tu, the banking sector is expected to increase credit by around 16% this year to achieve the 8% GDP growth target. Correspondingly, banks are expected to inject more than VND2,500 trillion ($98 billion) into the economy.

Vietnam’s GDP grew by 7% in 2023, with credit growth of 14.55%. In 2024, economic expansion hit 7.09%, while credit growth stood at 15.08% with more than VND2,100 trillion ($82.77 billion) pumped into the economy. On average, a more than 2% increase in credit growth contributes to a 1% rise in GDP, Tu elaborated.