Recent Trends in Deposit Interest Rates

Since December commenced, six banks have declared reductions in their deposit interest rates, including LPBank, VIB, IVB, ABBank, Kienlongbank, and BacA Bank.

However, in reality, only LPBank and Kienlongbank have significantly decreased their rates. The others have either lowered rates for short-term deposits or made adjustments only after increasing rates due to a directive from the State Bank of Vietnam on November 27, which urged banks to stabilize their interest rates.

On December 1, Indovina Bank (IVB) increased interest rates across all deposit terms (1 to 36 months), offering as much as 6.5 percent per annum for deposits lasting 24 months or more.

By the next week, IVB reduced its rates for 13-18 month deposits from 6.3 percent to 6.05 percent, and for 24-month or longer deposits from 6.5 percent to 6.2 percent.

IVB continues to be one of the banks with the highest interest rates for deposits with terms of 13 months or longer.

ABBank had raised its interest rates three times in November, reaching 6.3 percent for 24-month deposits and 6.2 percent for those of 15-18 months.

In early December, ABBank lowered these long-term rates (now capped at 5.7 percent per annum) while increasing rates for 1- and 12-month deposits.

Most recently, ABBank increased its rates for 3-12 month deposits by 0.2-0.25 percent per annum, becoming the first bank to implement two rate hikes in December.

BacA Bank has reduced its deposit interest rates for terms ranging from 1 to 36 months, although it had previously increased rates twice in October.

At certain points, its rates had reached 6.15 percent for deposits of 18-36 months under VND1 billion, and 6.35 percent for amounts over VND1 billion.

Following the interest rate reductions, BacA Bank’s highest rates stand at 5.95 percent for amounts under VND1 billion and 6.15 percent for higher amounts, still among the top rates available.

LPBank has lowered its rates for 1-11 month deposits, marking its second adjustment since early November, with rate cuts being more substantial than increases.

KienlongBank has maintained stable interest rates over the last three months but has recently reduced rates by 0.4-0.6 percent per annum for deposits of 1 to 60 months, marking its most significant adjustment since a prior increase.

Experts believe that the trend of decreasing interest rates is becoming more evident.

Meanwhile, eight banks, including DongA Bank, VPBank, OCB, MSB, GPBank, TPBank, ABBank, and IVB, have recently raised their interest rates.

Le Xuan Nghia, a member of the National Advisory Council for Financial and Monetary Policies, cautioned that higher interest rates may subsequently increase lending rates.

Two primary factors are driving banks to raise their rates: the need for capital to fund large projects and issues with liquidity due to potential bad debts.

Respected economist Vo Tri Thanh noted that interest rates are affected by various factors, mentioning the possible easing of monetary policy in developed nations, particularly during the Trump administration.

He anticipates a slight increase in deposit and interest rates in the near future due to the current business cycle but expects a decrease in the long term.

However, he cautions that any reductions may not be as substantial as anticipated, predicting continued economic challenges globally, including for Vietnam’s major trade partners, which may lead to further easing of interest rates. The State Bank of Vietnam must balance multiple objectives, including stabilizing exchange rates and managing inflation.

Dinh Trong Thinh, another notable economist, asserts that maintaining low interest rates will be challenging for banks, though they should strive to manage rates prudently as long as possible.