On June 16, 2020, the State Bank of Vietnam issued Circular No. 04/2022/TT-NHNN (“Circular 04”) stipulating the application of interest rates on premature withdrawal of deposits from credit institutions and foreign bank branches. This Circular shall come into force as of August 1, 2022 and shall replace Circular No. 04/2011/TT-NHNN. Circular 04 has some remarkable updated regulations as follows:
1. Allowing premature withdrawal of a part of the deposit
This is completely a new content compared to the current regulations. Accordingly, clients are allowed to withdraw part of the deposit before the due date or payment date of the deposit instead of having to pay off the entire amount previously deposited.
2. Interest rate for early withdrawal of part of the deposit:
- Regarding the withdrawn deposit before maturity: Apply a maximum interest rate equal to its lowest interest rate of demand deposits based on the type of client (usually no more than 0.1%/year) and/or currency of the deposit when such client withdraws it.
- Regarding the remaining deposit: Apply the interest rate equal to the interest rate applied to the deposit that the client has withdrawn a part – keeping the current applicable interest rate.
3. Deposits made before 01/08/2022 – the effective date of Circular 04:
Credit institutions and clients can negotiate to choose to continue to perform under the established agreement until the due date/payment date/payment date of the deposit or the applicable agreement as prescribed in Clause 1 of this Article. Circular 04.
Credit institutions and clients could negotiate to continue to follow either such agreements until the due date or payment date of the deposit or the agreements made according to Circular 04.
The updated regulations of Circular 04 have created a more flexible mechanism for clients when sending money. This is a necessary and appropriate policy to attract idle cash flow from the public to the system of credit institutions.
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