From May 1, 2011, commercial banks have to stop lending in gold as per a new decision by the State Bank. However, they still try to mobilize gold, while some banks have even raised the deposit interest rates in order to attract more gold to the banks.
Sacombank has reported that on May 18 and 19; the bank purchased 5800 taels of gold from the public, an increase of 20-30 percent in comparison with the days before. Ton The Vinh Quyen, a senior executive of Sacombank, has noted that the gold deposits have decreased, while the dong deposits have increased.
According to Saigon Tiep Thi, people have withdrawn gold deposits from banks to sell to the Phu Nhuan Jewelry Company (PNJ). The company has reported that it has purchased nearly one thousand taels of gold, while in April, it could only buy several hundreds of taels a day.
In order to attract more deposits, on May 18, Eximbank announced that it is buying gold from the gold depositors at the bank at the price which is 100,000 dong per tael higher than the average market price. The program is applied to the individuals who deposit gold at the bank, and now agree to sell gold to the bank to deposit dong at the bank as well.
Prior to that, Eximbank once ran a similar program, where it purchased gold at the prices higher by 0.15 percent than the market prices
Meanwhile, Viet A Bank is offering to purchase gold at the prices higher than the quoted price by 0.4 percent, applied to the individuals who now have gold deposits at the bank, and higher by 0.35 percent applied to the new individuals, who want to sell gold.
“K”, the owner of a kiosk at Ben Thanh Market, said that she has withdrawn 100 taels of gold from a bank on Nguyen Cong Tru road to deposit at another bank. The contract signed by K and the bank stipulates that the bank just keeps gold for K, and the interest rate is zero percent. However, in fact, K receives the interest rate of two percent per annum for the deposits.
K said many friends of hers have taken back gold deposits from banks to deposit at some gold shops to enjoy the interest rates of 3.5-5 percent per annum. However, K does not want to follow the friends, because she feels more secure when depositing at a bank.
A Deputy General Director of a bank said, that commercial banks now are competing with each other to mobilize gold, offering the interest rates of 2-3 percent. Meanwhile, some banks are offering the interest rate of four percent per annum.
A question has been raised that why do banks still keep mobilizing gold, if they cannot lend in gold? The deputy director said that though banks have stopped disbursing new loans, they still have big amounts of gold lent to clients, while a part of gold deposits has been converted into dollars and dong which they still have not taken back.
Mobilizing gold at the low interest rates of 1-2 percent, and then converting the gold into Vietnam dong to lend at the interest rate of 17-18 percent was the way that many banks followed, because this kind of business could bring fat profits to banks.
If banks immediately slash the interest rate on gold deposits to zero percent now, people will withdraw gold from banks immediately, which will immediately affect the banks’ balance sheet, and the banks’ scale will be smaller.
Also, if gold is withdrawn too rapidly while banks still cannot take back the lent gold, the ratio of the lent amount on the mobilized amount will increase sharply.
“If the ratio is higher than 80 percent, banks will violate the Circular 13 on the safety ratios in banking operation,” he said.
Therefore, the best solution for banks now is to maintain the gold deposit interest rates at reasonable levels in order to retain depositors, while banks will gradually reduce the gold outstanding loans together with reducing the gold deposits.