The reason why deposit interest rates hit rock bottom, people still deposit money in banks

Only 3 banks pay the highest interest rate at 6.2%/year

Last week, many major banks continued to maintain downward adjustments in savings interest rates. Currently, 12-month terms at many major banks are below 6%/year, the lowest in many years.

The highest 12-month term interest rate was recorded at PVcomBank, NCB, Sacombank, at 6.2%/year.

Vietcombank earlier this week reduced the rate by another 0.2% to 5.1%/year for terms of 12 months or more. The remaining 3 banks, Agribank, VietinBank, and BIDV, still maintain the highest deposit interest rate of 5.3%/year for terms of over 12 months. For terms of over 6 to under 12 months, the deposit interest rate is 4.3%/year, and for terms of 1 to under 6 months, it is 3-3.3%/year.

According to statistics from the beginning of October, 24 banks have reduced deposit interest rates, including: PVCombank, VIB, Sacombank, VietBank, SCB, VPBank, SHB, BIDV, VietinBank, HDBank, BaoViet Bank, Techcombank, SeABank, Viet A Bank, PG Bank, Dong A Bank, Vietcombank, LPBank, Nam A Bank, CBBank, ACB, Bac A Bank, and NCB.

Of which, CBBank, VIB, Vietcombank, SHB, Dong A Bank, PG Bank, Nam A Bank, HDBank, LPBank, Viet A Bank are the banks that reduced interest rates twice this month.

VietBank and Bac A Bank have reduced interest rates for the third time this month.

Interest rates on the market have continuously decreased over the past few months in the context of the banking system having "excess money" due to sluggish credit growth.

What do depositors do when interest rates hit rock bottom?

According to statistics from the State Bank, by August 2023, the amount of money people deposited in the banking system still increased to a record level. People's savings deposited in banks reached an all-time high of 6.43 million billion VND. This is the 13th consecutive month that people's deposits in banks have increased.

Notably, businesses also increased their deposits in banks again, with an additional VND103,501 billion in deposits in August. In July, the amount of deposits of economic organizations in the banking system decreased by more than VND74,000 billion compared to June.

By the end of August, deposits of economic organizations reached 6,013 trillion VND.

The reason people and businesses choose savings channels is because of their stability and safety, while other investment channels, although attractive, have many risks.

Sharing with Lao Dong Newspaper reporter, Viet Thang (born in 1996, Hanoi) saves 10 million VND every month. This has been Thang's regular habit for many years. Thang shared that because he has recently heard and read a lot of positive news, Thang does not want to choose any other investment channel other than savings. Moreover, Thang's previous deposits still received high interest.

Speaking to Lao Dong, Associate Professor Dr. Dinh Trong Thinh - senior lecturer at the Academy of Finance - said that when banks simultaneously reduce interest rates to rock bottom, whether money flows into other investment channels such as stocks, gold or real estate depends on investor sentiment. If they like to take risks, money will be withdrawn and put into other investment channels to seek higher profits.

Associate Professor Dr. Dinh Trong Thinh analyzed that in the current context, securities are still an attractive investment channel. This market has signs of improvement, but investing in securities can be risky if you do not research carefully and have the skills to analyze the market.

Meanwhile, investment channels such as gold and real estate are still unstable and have no bright spots. Some real estates are priced lower than before, but buyers may not want to borrow money from banks at this time.

Gold has fluctuated erratically over the past period, making buyers hesitant. Therefore, the current cash flow is mainly waiting to find investment opportunities.

"With its stability and low risk, saving money in banks is a form that many Vietnamese people prefer. The fear of losing money is still high, so even though the interest rate is low, they still accept it," said Mr. Thinh.

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