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What areSavings Deposits?
It is a type of deposit where you put your spare money into a credit institution (CI) to earn interest at a predetermined rate. Depending on your financial plan, there are various term options: short-term, long-term, or demand deposit.
The current interest rates for saving accounts at CIs range from 5% to 8% per annum. However, if you withdraw your money before the term ends, you will be charged a penalty fee or receive a very low interest rate (around 1% per annum).
How to calculate savings interest
For savings accounts, the deposited amount is tied to a specific term and interest rate. The CI will offer various term options so that customers can easily choose according to their needs (e.g., monthly, quarterly, annual, etc.). The formula for calculating interest on savings applies to term deposits (not applicable to compound interest) as follows:
- How to calculate daily interest:
Daily interest = Deposit amount x Interest rate (%/year) x Actual number of days deposited/365
- How to calculate monthly interest:
Monthly interest = Deposit amount x Interest rate (%/year)/12 x Actual number of months deposited
- How to calculate annual interest:
Annual interest = Deposit amount x Interest rate (%/year) x Actual number of years deposited
For example, when making a savings deposit of 300 million VND with a term of 6 months at a bank with an interest rate of 7% per annum, after 6 months, the depositor can withdraw the deposited amount along with the earned interest, which is: 300 million VND x 7%/year/12 x 6 months = 10.5 million VND.
Check your information on Savings Book/Savings Card
According to Article 7 of Circular No. 48/2018/TT-NHNN dated December 31, 2018 of the State Bank of Vietnam regulating deposits, “A Savings book or savings card is the certificate of ownership of asavings deposit made by the depositor held at a credit institution, applicable to cases where the depositor makessavings deposits at a legal transaction location within the credit institution's network”.
The Savings Book or Savings Card will include basic information such as:
- Credit institution’s name and seal; full name and signature of the bank teller and the legal representative of the credit institution;
- Full name, ID number, and date of issuance of the depositor's identification document or the identification documents of all depositors (in case of a joint savings deposit) and information of the depositor's legal representative if the savings deposit is made by the legal representative;
- The savings card number; amount; amount; currency; currency; date of deposit; maturity date (applied to term savings deposit); deposit term; interest rate; interest payment method;
- Methods offered to depositors to access their savings deposits;
- Handling procedures for lost, damaged, or crumbled savings cards.
Apart from these regulations, a savings book may have other information as prescribed by the credit institution. Therefore, in order to limit the risks of confusion and errors in depositor information, customers need to check the basic information in the savings book carefully.
Multiple people can share a savings book
Not only an individual but two or more people can make a joint savings deposit at a CI.
According to Article 2 of Circular No. 48/2018/TT-NHNN, joint savings deposits are deposited by two or more depositors. Additionally, according to Article 3 and Article 4 of Decision No. 1160/2004/QD-NHNN, the owner of the savings book is the person named on the savings book. In cases of joint ownership, two or more people can be listed as co-owners.” Thus, the savings book can be owned by one person or two or more people who are co-owners.
Will the depositors lose money if the CI goes bankrupt?
This is a major concern for depositors. If a CI goes bankrupt, will the savings be lost?
In Vietnam, as well as in many developed economies, deposits are secured by the deposit insurance policy. Participation in the DI scheme is mandatory as per Vietnamese law. According to Article 6 of the Law on DI and Article 4 of Decree No. 68/2013/ND-CP dated June 28, 2013 of the Government regulating and guiding the implementation of the Law on DI, the following organizations are required to participate in the DI scheme (excluding Policy Bank): commercial banks, Cooperative banks, people's credit funds, microfinance institutions and foreign bank branches authorized to receive individual deposits in Vietnamese Dong. Furthermore, according to Article 3 of Decision No. 32/2021/QD-TTg regarding the deposit insurance coverage limit:
“The maximum amount paid by the deposit insurance organization for all insured deposits under the provisions of the Law on DI (including both principal and interest) of an individual at an insured institution when the reimbursement duty arises is VND 125,000,000”.
In the event of a CI’s bankruptcy, individual deposits will be reimbursed by the DI organization (Deposit Insurance of Vietnam) in accordance with regulations. In addition, the Deposit Insurance of Vietnam (DIV) also regularly monitors and examines institutions to detect violations and potential risks, thereby providing warnings and recommendations to CIs to rectify and promptly address any issues. Furthermore, depositors are provided with detailed information about the policies and operations of the DIV to enhance their necessary understanding.
To be best protected by law and to have complete peace of mind when choosing to deposit money at a CI, depositors need to thoroughly understand the information on savings deposits specifically, the operations of deposit -taking institutions in general, and the fundamental principles of the DI policy.
Department of Research and International Cooperation (translation)
