Vietnam Banks See Deposit Surge as Interest Rates Climb, Investors Cautious

Vietnamese bank deposits have reached a new record high of VND 10,826 trillion (approximately US$65 billion) as of the end of May 2026, according to the latest data from the State Bank of Vietnam (SBV). This marks a continued surge since the deposits first crossed the VND 10 trillion threshold in October 2025. The increase in deposits is attributed to a strong wave of rising deposit interest rates that began in late 2025 and continued into the early months of this year. With high capital demand and tight mobilization, banks have been aggressively increasing their deposit rates to attract funds. Some private banks have even offered rates of 7-9% per year for deposits as low as a few hundred million dong. Following his appointment in early April, SBV Governor Pham Duc An requested banks to lower interest rates to support citizens and businesses. While there was a brief period of rate reduction, market fluctuations quickly reversed this trend. Despite relatively stable listed rates around 6-7% per year, a "hidden wave" of negotiated interest rates is pushing up the actual mobilization costs. Through priority customer programs and referral schemes, effective interest rates for 12-month terms at many banks have reached 8-9% per year, and even up to 10% for particularly large deposits. Experts explain that both state-owned and private banks need to raise capital because credit growth is significantly outpacing deposit mobilization. This credit expansion is a key financial tool the government under Prime Minister Pham Minh Chinh has employed to achieve growth targets towards the end of its term. As of mid-July 2026, outstanding credit in the economy reached nearly VND 20.1 quadrillion, an increase of 7.86% from the end of the previous year. This credit growth rate, about 2% higher than deposit mobilization, forces banks to maintain high interest rates to proactively supplement their capital sources. Observers predict that interest rates will not decrease significantly in the remainder of the year unless inflation cools considerably, system liquidity becomes abundant, and borrowing demand declines sharply. At a seminar on "Vietnam Credit Outlook 2H2026" on July 22, Phan Quoc Buu, Director of Research and Analysis at BIDV Securities Company (BSC), estimated that interest rates have likely approached their peak and will remain flat or increase slightly in the second half of 2026. Furthermore, rising interbank costs and inflationary pressures compel credit institutions to maintain sufficiently attractive real interest rates to retain customers. Some experts believe deposit rates will remain high but stabilize within a narrow band. While this influx of funds helps banks improve their capital for credit expansion, financial and banking expert Nguyen Tri Hieu cautioned in a recent interview that an over-reliance on savings instead of productive investment could reduce the efficiency of the economy's resource utilization. The trend reflects a public preference for safety amid instability in other investment channels. Following the sharp price increases in stocks, real estate, and gold in 2024-2025, these markets have seen significant downturns. Gold prices have fallen by about 30% from their peak, while the stock market has also experienced substantial declines. Real estate, though not experiencing sharp drops, has seen a slight downward trend nationwide. Global gold prices have stabilized after a surge driven by geopolitical tensions. A stronger US dollar and the prospect of prolonged high interest rates from the US Federal Reserve have diminished gold's appeal. While the Fed maintained its interest rates on July 30 (Vietnam time), domestic gold prices have continued to fall as citizens rush to sell, partly due to uncertainties surrounding major gold trading companies. PNJ (Phu Nhuan Jewelry Joint Stock Company) has had to implement daily payment limits and extend cash payment times up to 120 days for customers selling back gold or diamonds, under pressure from large buyback demands. This pressure stems from a cross-border diamond smuggling case involving SJC and PNJ, leading to the prosecution and detention of many gold shop owners. Over 30 gold and jewelry businesses in Ho Chi Minh City had temporarily suspended operations by early July, according to preliminary surveys. In the real estate market, variable mortgage rates at commercial banks remain high, creating significant financial pressure on both end-users and investors, according to analysis from MB Securities. As of mid-July, floating rates at many banks have reached 15-16% per year. This capital cost shock has led to a 62% decrease in primary real estate absorption in the first half of 2026 compared to the latter half of 2025, with only about 26,100 units sold. This decline occurred despite a 40% increase in supply, partly due to Resolution No. 29/2026/QH16 on land management, which is expected to unlock approximately US$130 billion in previously frozen capital. Source: BBC Vietnamese