Zero percent interest rate could lead to bleeding of dollars
VietNamNet Bridge - Analysts have warned that the kieu hoi flow (overseas remittance) to Vietnam would slow, while Vietnamese may deposit dollars at Laos banks instead of Vietnamese as a result of the State Bank’s zero-percent interest rate policy.

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The State Bank, in an unexpected move, has slashed the dollar deposit interest rate from 0.25 percent to zero percent applied to deposits from individuals. Meanwhile, the zero percent interest rate has been applied to deposits from legal entities since September.

Some bankers noted that many depositors have withdrawn dollar deposits and sold dollars for Vietnam dong. Some of them have deposited dong at banks, while others have injected money into other investment channels – gold, securities and real estate.

According to Dang Quoc Tien, a banking expert, the dollar deposit interest rate reduction to zero percent would prompt people to sell more dollars to banks, thus helping the State Bank increase the foreign exchange reserves.

However, this is not good news for import companies which have to borrow dollars to make payment for imports, the demand which has been increasing rapidly. 

In principle, banks can only lend in dollars if they can mobilize capital in dollars. “Will commercial banks be able to mobilize capital in foreign currencies in such conditions?” he asked.

What would happen if people withdrew dollar deposits because they would rather keep dollars at home than deposit dollars at banks for zero interest rate?

Nguyen Tri Hieu, a banking expert, warned that commercial banks may meet dollar liquidity problems.

However, Hieu reassured the public that the massive withdrawal of dollars has not happened since the day the central bank announced the zero percent interest rate.

Meanwhile, Nguyen Hoang Minh, deputy director of the HCM City branch of the State Bank, said that overseas remittances continue.

Minh said he cannot see any big changes in the supply and demand in the foreign exchange market, saying that the volume of dollars banks continues to increase and the kieu hoi volume is also on the rise. 

Vietnamese may deposit dollars at Laos banks instead of Vietnamese as a result of the State Bank’s zero-percent interest rate policy.
It is estimated that HCM City would receive $5.5 billion worth of kieu hoi in 2015, an increase of 10 percent compared with 2014. 

When asked why dollar depositors keep dollars despite the zero interest rate, an analyst said they may think the dollar price would increase in the future. 

If someone deposits $100,000 at a bank, he would receive interest of $20 a month with an interest rate of 0.25 percent. As the interest rate goes down to zero, they would lose interest of $20 a month, but they hope the dollar price increases would offset the loss.


PL TPHCM


Vietnam, dollar price, SBV, dong/dollar exchange rate, vietnamnet bridge, english news, Vietnam news, news Vietnam, vietnamnet news, Vietnam net news, Vietnam latest news, Vietnam breaking news,
 
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