Reasons why banks are 'racing' to pay interest upfront.

Not only are many banks maintaining high deposit interest rates, but they are also willing to pay interest immediately upon customers depositing money, even for amounts as small as a few million dong.

Ms. Thu Minh (Dong Da ward, Hanoi ) said she was quite surprised when she opened a state-owned bank's app to deposit savings and saw an additional option: "pay interest upfront."

"I noticed that the upfront interest rate is only slightly lower than the post-payment interest rate. The 6-month term currently offers an interest rate of around 6.38% per year. What's noteworthy is that the bank accepts deposits starting from just 3 million VND," Ms. Minh said.

Interest is received immediately upon deposit.

One bank is offering an upfront interest rate of up to 6.38% per annum for a 6-month term, starting from a minimum deposit of 3 million VND.

Many other credit institutions are also implementing the practice of paying interest upfront at the beginning of the term with high interest rates. Another state-owned bank is currently applying an upfront interest rate of approximately 4.73%/year for a 1-month term and up to 6.57%/year for a 6-month term.

A bank executive stated that the return of banks to aggressively promoting savings products with interest paid upfront indicates a significant increase in capital mobilization pressure. This was unprecedented. While credit is growing rapidly, capital mobilization is increasing more slowly, resulting in an estimated gap of approximately 2 trillion VND between deposits and loans across the entire system.

According to this source, in order to secure capital for credit growth, many banks are forced to increase the attractiveness of their savings products. "Besides maintaining high interest rates, banks are also accepting immediate interest payments to depositors. This means banks have to incur upfront costs to retain capital," this source said.

Capital costs have risen sharply, and liquidity pressure remains unabated.

The race to raise capital, which has lasted from the end of 2025 until now, is putting significant pressure on the operating costs of the banking system. The financial reports of many banks in the first quarter show a sharp increase in interest expenses on deposits, even far exceeding the growth rate of capital mobilization.

According to data from 27 listed banks, BIDV continues to be the bank that spends the most on deposit interest, with 21,955 billion VND in the first quarter, a 20% increase compared to the same period last year. On average, this bank spends nearly 244 billion VND in interest payments to depositors every day.

VietinBank ranked second with VND 19,204 billion , an increase of 33%; Vietcombank reached VND 13,640 billion , an increase of 31%.

Among private banks, MB attracted attention when its deposit interest expenses exceeded VND 10,000 billion , an increase of 82% - the sharpest increase among major banks.

According to financial experts, what is noteworthy is not only the absolute scale of costs but also the significantly higher rate of increase compared to deposit growth. This reflects a marked increase in the cost of capital for the banking system.

Typically, interest expense on deposits is influenced by two factors: the scale of deposits and the interest rate paid. If the rate of increase in interest expense significantly outpaces the growth in deposits, it indicates that banks are paying higher costs of capital to attract funds.

However, many experts believe that from now until the end of the third quarter of this year, deposit interest rates may continue to remain high, but a widespread, heated race to increase rates like in 2022 is unlikely. The State Bank of Vietnam currently prioritizes stabilizing interest rates to support economic growth and control capital costs for businesses.

However, liquidity pressure and the need for medium- and long-term capital remain a major challenge for many banks, especially joint-stock commercial banks. Therefore, the likelihood of a significant drop in deposit interest rates in the short term is not high.

In this context, depositors have the opportunity to enjoy relatively attractive returns, while still being considered a safer investment channel compared to many other assets on the market.

Source: https://znews.vn/ly-do-ngan-hang-chay-dua-tra-lai-dau-ky-post1655363.html