Deposit “idle cash” at commercial banks in general and at credit institutions or bank branches in particular is making the money grow more or less. Only at the end of one’s tether do people have to withdraw the money prematurely because they will lose a great amout of interests. From August 1st, 2022, Circular No. 04/2022/TT-NHNN dated June 16th, 2022 on application of interest rates on premature withdrawal of deposits from credit institutions, foreign bank branches (Circular 04) to replace Circular No. 04/2011/TT-NHNN dated March 10th, 2011 officially takes effect and has positive effects to depositors and credit institutions and foreign bank branches nationwide.

Regulated entities

Circular 04 enlisted specifically the regulated entities including credit institutions and foreign bank branches operating in Vietnam (hereinafter referred as “credit institutions”), excluding policy banks.

Circular 04 also defined the clients to withdraw premature deposits under this Circular as organizations and individuals, the term “organizations” does not include credit institutions.

Forms of deposits applicable to premature withdrawal

Premature withdrawal of deposits is when a client withdraws a part or all of the deposit before the due date or mature date of such deposit. Circular 04 applies to the following forms of deposit:

1. Time saving deposits
2. Time deposits
3. Deposit certificates, bills, treasury bills and bonds issued by credit institutions
4. Other forms of receiving time deposit according to the Law on credit institutions

Regulations regarding interest rates on premature withdrawal of deposits

Circular 04 give permission for credit institutions and clients to make agreements on premature withdrawal of deposits in compliance with regulations of SBV. However, the interest rates on premature withdrawal of deposits does not exceed the maximum interest rates prescribed at Circular 02.

In case no agreements are made, credit institutions shall apply the following interest rates:

1. If a client withdraws all of the deposit: Apply a maximum interest rates equal to its lowest interest rates of demand deposits based on the type of client or currency.
2. If a client withdraws a part of the deposit: Regarding the premature withdrawn part: Apply interest rates as 3.(a); Regarding the remaining deposit: Apply the current interest rates that credit institutions are applying to such deposit instead of getting really low demand interest rates for the whole deposit.