Nguyen Quoc Hung, secretary general of the Vietnam Banking Association (VBA), noted that deposits at banks are on the rise despite interest rate decreases.

“This truly reflects the current situation of the national economy as well as its capital absorption capability,” Hung said.

“The bond and real estate markets are nearly frozen. The gold and dollar markets can’t catch the attention of investors. Where to invest now? I think deposits will keep increasing even if the deposit interest rates continue sliding,” he explained.

The State Bank of Vietnam's (SBV) latest report showed that as of the end of May 2023, deposits from the public at credit institutions had peaked at VND6.347 quadrillion, up VND677 trillion, or 8.21 percent compared with the same period last year.

Meanwhile, deposits from economic institutions had reached VND5.74 quadrillion, a slight fall of 3.45 percent.

The deposits from the public continued amid the downward trend since the beginning of the year.

Deposit interest rates quoted by banks on July 28 showed that most banks have cut the rates to below 8 percent. The most common interest rates now hover around 6-7.2 percent per annum, applied to 6-12 month deposits.

With businesses and people rushing to deposit money at banks, analysts point out that this is bad news for the national economy as cash is left idle instead of being used in the production and business sector.

“Credit institutions have never before seen deposits grow so rapidly. By contrast, credit has been growing very slowly compared with previous years,” Hung said.

Though interest rates are low, businesses are not borrowing capital now as they don’t know where to invest. This was seen in the second quarter financial report of some enterprises.

Sabeco reported that by the end of June, it had VND23 trillion (US$1 billion) deposited at banks. The firm earned VND712 billion of interests in the first half of 2023, up 48 percent year on year, accounting for 33 percent of its profits during this period. Meanwhile, its revenue from beer reduced by VND1.5 trillion to VND12.911 trillion.

Tuan Nguyen