Vietnamese Banks Compete with High Interest Rates on Certificates of Deposit

Several Vietnamese banks are actively attracting customers by offering Certificates of Deposit (CDs) with high annual interest rates ranging from 6% to 9%. These CDs are typically available with a minimum investment of VND 10 million (approximately USD 400), and some even lower. This rate significantly surpasses the 4.75% annual cap set for regular short-term savings deposits of less than six months. VPBank, in particular, increased interest rates on its 1- to 6-month CDs in mid-July while simultaneously lowering the minimum purchase denomination from VND 100 million to VND 10 million. This allows customers to earn annual interest rates of 6.2% to 7.8% for VND 10 million purchases, and 7.3% to 9% for amounts of VND 100 million or more. ACB and MB Bank are also offering similar short-term CDs starting from VND 10 million with rates of 6.5% to 7.2%, while MB Bank also provides CDs starting from as low as VND 200,000. These moves are occurring against a backdrop of intensifying competition for funding among banks. Bank employees are proactively encouraging customers to switch from regular savings deposits to higher-yield CDs. Since CDs are not subject to the central bank's interest rate cap, they can offer rates that are 2-3 percentage points higher than those for comparable short-term deposits. Furthermore, some banks, including VPBank and ACB, allow CDs to be transferred or used as collateral, catering to customers who may need access to funds before maturity. Experts explain that CDs are financial instruments issued in the form of certificates, obligating the issuing bank to repay the purchaser within a specified period. Compared to regular savings accounts, CDs generally offer higher yields, making short-term CDs an attractive option. However, experts advise customers to not only consider the advertised interest rates but also to thoroughly understand the product's structure and the methods for retrieving funds before maturity. The liquidity of CDs can sometimes be lower than that of savings accounts. While savings accounts can be withdrawn according to bank regulations, they typically earn no interest upon early withdrawal. In contrast, CDs are not directly redeemable with the bank but can usually be transferred to other individuals or institutions or used as collateral for loans. Banks such as VPBank, ACB, and MB Bank are enhancing convenience by enabling CD transfers and transactions through their online banking applications. Some banks have established mechanisms where CDs, after issuance, are purchased by intermediary organizations and then resold. This allows investors to trade bank-issued CDs in the secondary market, meeting short-term investment needs. Investors should be aware that the recovery of funds may depend not only on the issuing bank but also on the transfer mechanism and the performance commitments of intermediary entities.