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Saturday, June 15, 2024

Higher interest rates spur savings

By Dung Nguyen

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HCMC – Cash has continued to flow into savings accounts as interest rates rise, according to data of the central bank.

The State Bank of Vietnam said savings had amounted to around VND50.5 trillion in the year to end-June, up 0.5% against May and 6.02% versus the beginning of the year. Institutional deposits also increased to VND42 trillion.

Individual savings continued growing after a pause in March. According to preliminary figures from 20 banks, individual savings rose 4.9% in the first half of the year.

August saw interest rates up by 20 to 40 basis points for 12-month term savings, SSI analysts said.

The Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) in July raised its one-year deposit rate by 0.1 percentage point to 5.6%.

After an interest rate hike in early July, the Asia Commercial Joint Stock Bank (ACB) by the end of the month continued raising its rate for one-year deposits to 6.2%.

The Vietnam Technological and Commercial Joint Stock Bank (Techcombank) also raised its annual interest rate to 5.75%, up 20 basis points over last month.

Online banking has also spurred an interest rate hike race. Cake by VPBank, an online banking application introduced by Vietnam Prosperity Joint Stock Commercial Bank (VPBank), offered a yearly savings rate of up to 7.5%. This online banking service hit the two-million-customer milestone after just 19 months of operation.

Despite higher deposits, banks still cannot meet the borrowing demand. According to SSI, the imbalance between cash supply and demand, along with strict control over credit growth, has put pressure on the banking sector.

Interest rate hikes are inevitable, as the country sees growing signs of inflation, said a banker. Banks also need capital to lend to customers once credit growth quotas are revised up, he added.

New regulations, effective from early August, allow bank clients to enjoy the original interest rate for the remaining amount of term savings when they withdraw part of their savings. In the past, clients would be entitled to a low demand savings rate after they withdraw part of their term savings which often enjoy a higher interest rate.

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