The maximum insurance payable to a depositor for all deposits in an insured organisation will be raised to VND75 million (US$3,289) from VND50 million from August this year.
Under Decision 21/2017/QD-TTg, issued last week by Prime Minister Nguyen Xuan Phuc, the insured deposit amount, which is paid by the Deposit Insurance of Viet Nam (DIV), will include both principal and interest.
As per current regulations, to get deposit compensation, credit institutions and banks mobilising deposits are required to purchase the insurance.
Insured banks have to declare the list of deposit insurance schemes they have purchased to all transaction offices.
To be eligible for insurance, deposits must be in Vietnamese dong. Depositors will be paid back 60 days after the bankrupt institution ceases all transactions.
In case the bankrupt credit institution or bank gets mired in dissolution, which affects the security of the banking and finance system, the DIV will support these banks by lending, guaranteeing, or covering their debts.
Like in most other countries, Viet Nam’s deposit insurance policies have two main aims: to protect depositors and to secure the banking industry.
Public trust in the banking system is important, and can be significantly improved through deposit insurance policies.
The insurance limit is being raised after experts and depositors have repeatedly pointed out that the current limit of VND50 million per customer is very low. The limit is much lower than the 50,000 euros in Europe, $200,000 in the Republic of Korea and $250,000 in the United States, they said.
According to the State Bank of Viet Nam, institutions and individuals deposit roughly VND6 quadrillion in the country’s commercial banks.
Currently, annnual interest rates for dong deposits average at 0.8-1 per cent for below one month terms, 4.5-5.4 per cent for one to six months, 5.4-6.5 per cent for six to 12 months, and 6.4-7.2 per cent for above 12 months.