Why Are People Still Putting Their Money in Banks Despite the Drastic Drop in Interest Rates?

Savings deposits: Awaiting Better Investment Opportunities

According to the State Bank of Vietnam, total deposits reached nearly VND 15 million billion by the end of the first quarter, with a significant increase in personal deposits. Out of the total VND 15 million billion deposited in the banking system, nearly VND 7.5 million billion came from personal deposits, an increase of over 5.73% compared to the beginning of the year. This means that in just the first three months of the year, individuals deposited more than VND 404,800 billion in banks.

Currently, the interest rate for 12-month term deposits at joint-stock commercial banks hovers around 5% per annum. State-owned banks have also maintained low rates, at around 4.7%, slightly lower than at the beginning of the year.

Ms. Chau Anh from Thanh Xuan, Hanoi, shared her perspective: “I still opt for fixed deposits with a 6-12 month tenure as I haven’t come across any lucrative and safe investment avenues at the moment.”

In Ms. Chau Anh’s opinion, the real estate sector is currently overpriced and fraught with risks. “With apartments or land in Hanoi, it’s challenging to acquire property worth VND 2-3 billion due to the soaring prices. I believe that the real estate market is unlikely to witness significant price hikes,” she added.

Mr. Minh Long, a resident of Hoang Mai, Hanoi, also chooses to keep his money in savings accounts for the time being. “I used to invest in gold, but the price is now high, and the State Bank of Vietnam is drafting Decree 24 on managing the gold market with some new provisions. So, the market is unlikely to experience the same feverish demand as before. I think it’s wise to remain calm and consider various factors, including global and domestic gold price movements,” he explained.

Lack of Attractive Investment Channels

In a few weeks, enterprises will release their second-quarter financial reports for this year. Many businesses showed positive signs in the first quarter and are expected to continue their growth trajectory in the current quarter. Analysts predict double-digit growth for banks, while real estate and gold enterprises are also expected to show positive signals, albeit with lower profits.

Based on these forecasts, market analysts suggest that while there are multiple investment channels, the downside is that none of them stand out in terms of yield, liquidity, and safety.

Assoc. Prof. Dr. Nguyen Huu Huan, a finance expert from the University of Economics Ho Chi Minh City, analyzed that the stock market is still volatile, and the real estate market recovery is slow. As a result, individuals tend to tighten their belts and opt for the safer choice of depositing money in banks while awaiting better opportunities in other investment channels.

According to Dr. Huan, the current interest rates, although not exceptionally high, still guarantee profits and capital security for depositors.

Economist Nguyen Quang Huy shared his insights on other investment avenues. Regarding the real estate sector, he noted that after a period of rapid growth, the market has shown signs of cooling down in the past few months. Additionally, the lack of synchronized legal frameworks makes investors cautious.

Turning to the stock market, Dr. Huy acknowledged improvements in indices but warned of underlying risks due to the uncertain global and domestic economic landscape. Investors are awaiting clearer signals, such as macroeconomic stability, resolution of international trade conflicts, and advancements in market upgrade endeavors.

As for gold and foreign currency investments, the former is currently at record highs and is highly volatile, causing concern among investors. Moreover, gold purchases are challenging due to limited supply. Meanwhile, the foreign currency channel is constrained by foreign exchange market management policies and exchange rate risks.

Dr. Huy predicted that in the second half of the year, bank deposits would continue to set new records as individuals predominantly favor savings accounts.