Vietnam's BIDV Significantly Raises Deposit Rates Amid Funding Challenges

BIDV (Bank for Investment and Development of Vietnam), a major state-owned bank, has significantly raised its online deposit interest rates for terms of 6 months or more to an annual rate of 7.2% to 7.4%. This marks one of the highest rates within the bank's system and is among the highest in the overall market. Specifically, the 12-month term now offers 7.4%, a 0.6 percentage point increase from the previous month. Meanwhile, interest rates for deposits under 6 months remain unchanged at the State Bank of Vietnam's ceiling of 4.75% per year. Over-the-counter deposit rates are also considerably lower, ranging from 2.1% to 3.5% for short terms (under 6 months) and 5.9% to 6% for longer terms (6 months and above). This recent rate hike by BIDV occurs in a context where its deposit growth has lagged significantly behind its credit expansion. As of the end of June, the bank's outstanding loans to customers reached over 2.5 quadrillion VND, an increase of 5.43% since the beginning of the year. In contrast, customer deposits grew by only 1.74% to nearly 2.26 quadrillion VND. To compensate for this funding gap, BIDV has intensified its fundraising efforts in the first half of the year, primarily through issuing negotiable certificates of deposit (NCDs). By the end of June, the balance of NCDs reached nearly 301.7 trillion VND, a 34% increase from the start of the year. Notably, NCDs issued for longer terms saw a substantial rise, from over 153.3 trillion VND to 223.5 trillion VND, an increase of nearly 46% year-to-date. Across the market, some private banks are offering rates as high as 7.9% per year for 13-month terms. Furthermore, reports indicate that actual negotiated rates, often facilitated through employee referral codes, can reach 9% per year for deposits of several hundred million VND. The move by a major state-owned bank like BIDV to significantly increase its deposit rates, which were previously set lower than those of private banks, signals an intensifying competition for funding in Vietnam's financial market and warrants close attention to the direction of monetary policy in conjunction with inflation control efforts.