Banks are increasing dong interest rates for online savings depositors as a way to reduce their mobilisation costs and also to encourage customers to increase the use of electronic banking (e-banking) channels.
For example, Viet Capital Commercial Joint Stock Bank (VietCapitalBank) added 0.8 percent per annum to online savings rate with terms from six months or more. Accordingly, a customer who wants to save money online just need to download e-banking application to his/ her phone to register an online account and choose to deposit online without having to go to the bank’s counter. During the use of online banking application, owner of online savings account can keep track of his/ her savings balance right on his/ her mobile phone. If an online account owner needs to mortgage his/ her savings book, the bank will still print the book for the customer when needed.
Maritime Commercial Joint Stock Bank (MSB) also increased its online savings rates 0.5 percent per annum higher than the rates at the counter. Nam A Commercial Joint Stock Bank (NamABank) offers six-month and 12-month online savings rates at respectively 1.2 percent and 0.5 percent per annum higher than the rates at the counter. HCM City Development Commercial Joint Stock Bank (HDBank) is launching a programme which gives each customer downloading the application 50,000 dong, along with many other additional interest rates, gifts, for online savings depositors.
Online savings allows customers who want to deposit money to transfer from demand deposit account to term savings account to enjoy higher interest rates. Accordingly, people with small sources of income can easily transfer money between term savings accounts on the Interest instead of going to the counters. Currently, the banking system is exempting and reducing money transfer fees for small transactions of less than two million dong per transaction, making it easier for online savings customers to accumulate money from one million dong or more.
According to statistics of the State Bank of Vietnam (SBV), in the last week of April of 2020, commercial banks applied average dong interest rates of 0.1 0.5 percent per annum for non-term deposits and deposits with terms of less than one-month, 4.3 4.75 percent per annum for deposits with terms from one month to less than six months, 5.3 6.8 percent per annum for deposits with terms from six to less than 12 months, and 6.6 7.4 percent per annum for deposits with terms from 12 months or more.
Regarding the concern about whether raising online deposit rates would increase lending rates, Nguyen Hoang Minh, deputy director of the SBV HCM City branch said that due to the development of banking technology and especially in the context of the complicated Covid-19 development, banks are promoting online products, including online savings. The development of online banking services will reduce operating costs and banks will share this benefit to depositors. This also aims to encourage customers to use online banking services.
Agreeing with this view, many experts said that because the interest rate increase is not significant, and only applies to online savings deposits, it will not affect the deposit interest rate level of the market. Moreover, banks are still strictly complying with regulations on deposit interest rates of the SBV.
Accordingly, the SBV has decided to reduce operating rates, in which the maximum interest rate for demand deposits and deposits with terms of less than one month was cut from 0.5 percent to 0.2 percent per annum, and the maximum interest rate for deposits with terms from one to less than six months was lowered from 4.75 percent to 4.25 percent per annum. These decisions officially took effect from May 13th 2020. Right after the decisions of the SBV, banks have immediately adjusted their deposit interest rates, including online savings rates.
Talking about this move, many banking experts said that the reduction of operating interest rates is necessary, which creates favourable conditions for banks to reduce lending interest rates and supports businesses to recover after the Covid-19 pandemic.
