Meanwhile, the maximum interest rate for deposits with terms longer than a month is 14% a year while that of local People’s Credit Fund is 14.5% a year.

Credit institutions are requested by the central bank to publicly quote the deposit interest rate in Vietnam dong in transaction offices in line with its regulations and are banned from carrying out any promotional programs by means of cash, interest rate and other forms which are inappropriate to the law.

Besides, the term deposit interest rates in Vietnam dong set up in credit institutions before the effective date of the circular are allowed to be kept intact until the expiry date. Until then, the deposit interest rates must be applied in accordance with the circular if the organizations and individuals make no withdrawals.

The central bank’s reason for stipulating the maximum interest rates for deposits with terms under one month is that many banks have launched demand or one-day-term deposit products recently at an interest rate of 14% in a bid to lure depositors due to the serious drop in deposits at banks.

The interest rate for day-term deposits at 14% can reach 15% a year thanks to the accrual of interest and the principal on a daily basis.

According to the central bank, the interest rate of 14% for deposits with terms less than a month may pose hidden risks of liquidity to both the credit institutions and the banking system.