Deposit

interest rates
in Vietnam:
Fact and
discussion
Group 3
Table of contents
01 02
Deposit interest rate situation
Introduction of Vietnam
- What is deposit interest rate? - Deposit interest rate of VN in
- Features of bank deposits? the last 10 years

03 04
Conclusion &
Discussion
suggestion
- Reasons for the fluctuation of -Suggestion for commercial bank
deposit interest rates?
- Effects of the decrease in
deposit interest rates?
01
Introduction

- What is deposit interest

rate?
- Types of bank deposits and
accounts
What is deposit interest rates?

Deposit interest rate is the interest rate that banks pay for
deposits in banks of organizations, or individuals. Depending
on the type of deposit account, the deposit term and the size of
the deposit, there are different interest rates.
Features of bank deposits?

-Deposit accounts are attractive for investors as a safe vehicle for

maintaining their principle, earning a small amount of fixed
interest, and taking advantage of insurance.

-The fixed interest rates guaranteed with certain deposit accounts

tend to be smaller compared with the variable returns of other
financial vehicles.
-Currently, deposit interest rates are divided into two popular types:
demand deposit interest rate and term deposit interest rate
 02
Deposit interest rate
situation of Vietnam
14%->4%
2011-2021
 The slide title
goes here!

- In the period 2010 - 2011, in the context of the SBV tightening monetary policy, commercial
banks, especially small banks, faced many difficulties in mobilizing capital and were forced to
raise deposit interest rates to a record high. (>14%, 2011)
- After inflation is controlled and the economy is stable again, interest rates will also decrease
accordingly
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goes here!

- In the past 10 years, deposit interest rates in Vietnam have decreased by about 10
percentage points, the strongest decrease in Southeast Asia.
- The reduction of deposit interest rates from 14-15%/year to 4-5%/year is the result of
bringing the financial economy from unstable state to normal state.
 2021 and Trend

- In September 2021, the money market continued to receive a new reduction in VND deposit
interest rates to the lowest level in many years, ranging from 2.7-4.0% for terms of less than 6
months, 3 ,7 - 5.0% for term of 6 - 12 months and 4.6 - 6.5% for term of more than 12 months.

- At big banks, the 6-month term interest rate has been reduced to 4%/year; 12 month term is
less than 5.5%/year. For deposits of businesses, the new interest rates are even lower.

=>The downtrend may not stop as the SBV still maintains the orientation of
loosening monetary policy to support people and businesses during the epidemic
period.
 03
Discussion
- Reasons for the fluctuation of
deposit interest rates?
- Effects of the decrease in deposit
interest rates?
Reasons for the fluctuation of deposit interest rates

Monetary and fiscal policies

Of Gorvernment

Excess liquidity in
commercial banks

Pressure to reduce input

costs to reduce lending
interest rates
 Monetary and fiscal policies Of Gorvernment

The reduction of deposit interest rates from 14-15%/year to 4-5%/year is the result of bringing
the economy-financial economy from unstable state to normal state.

This result has a great role of the Government in the management of financial - monetary policy.
Specifically, monetary policy has begun to tighten in the period 2012 - 2013; In the following
years, prudent monetary policy was applied along with planned budget revenues and
expenditures based on the macroeconomic background, which helped lower inflation to only
2-4%/year.
 Excess liquidity in commercial
banks
- The primary reason for the cut in interest rates is fragile economic conditions and rate cuts by
central banks across the world for stimulate the economy. Such conditions lead to excess
liquidity that makes access to the funds more affordable.

- Deposit interest rates were high in the period 2010-2011 because banks lacked liquidity. This
situation comes from the promotion of lending to risky areas, which increases capital demand,
thereby forcing banks to raise deposit rates to attract deposits. Meanwhile, the liquidity of banks
in recent years has always remained in an abundant state, thereby helping to stabilize deposit
interest rates.
 Pressure to reduce input costs to
reduce lending interest rates
The pressure to reduce input costs to reduce lending rates, support businesses and the
economy makes many banks unable to maintain savings interest rates at attractive levels as
before. However, a bank leader shared that lending is not easy due to the negative impact of the
epidemic. Enterprises have broken production and consumption chains, interrupted cash flow,
difficult to meet the requirements of production plans, cash flow to repay loans ... to borrow new.
Therefore, the bank must accompany with financial advice, support to find partners to supply raw
materials and sell products to help customers maintain and restore production.
Effect of the decrease in deposit interest rates
Causing instability to the economy, the social security
If deposit interest rates are too low, people will withdraw their deposits from banks and switch to
other investment channels, causing instability to the economy, social security
Liquidity shortage of banks
The banking system may be put in a state of liquidity shortage, leading to a lack of capital for
production, business and consumption, and customers face the reality of competing for loans.
Lack of provision for bad debts formed in the future

Lack of provision for bad debts formed in the future

 04

Conclusion and suggestion

Suggestion

• With bad debt pressure due to the current COVID-19

pandemic, banks should consider increasing deposit interest
rates to increase provisions for bad debts formed in the
future.
Conclusion

• Deposit interest rates play a particularly important role, greatly

affecting the economy. If the interest rate is reasonable, it will be an
important lever to promote the development of production and
circulation of goods. On the contrary, an unreasonable interest rate
mechanism will be a limiting factor for economic development,
causing serious crises.

• Therefore, deposit interest rates should always be innovated in the

direction of diversification and flexibility to satisfy the needs of
customers, creating conditions for the bank to minimize input costs
and increase profits.
Thanks
Any question????