Headquarters of the State Bank of Vietnam in Hanoi (Photo: SBV)


 

 

Hanoi (VNA) – The State Bank of Vietnam (SBV) is
collecting feedback on a draft circular that will, among other things, allow
non-residents legally present in Vietnam to make term deposits in both VND and
foreign currencies.



The central bank argues that the permission is a measure to
prevent “hot money flows,” or flow of funds from one country to another to earn
short-term profit on interest rates differences, from entering the
exchange market. It is also a way to ensure the legal rights of non-residents
present in the country, it said.



The draft, released on July 4, has thus far received positive
feedback from commercial banks and other credit institutions. Directors at a
majority of the banks consider the circular a significant improvement over
previous regulations, the SBV has reported. They said the new rules can help
attract another source of capital and utilise idle capital from expatriates
working in Vietnam.



Furthermore, by allowing foreigners to switch from using a current
account in VND or foreign currency to using term deposits,
authorities will also find it much easier to control the flow of capital from
this group.



It is hoped that with interest rates on deposits in foreign
currencies at zero percent, the five to eight percent interest rates for
deposits in VND will motivate more people to deposit their savings in the local
currency.



The central bank said that previously, non-resident foreigners in Vietnam
were only allowed to open current accounts in VND or foreign currencies, so the
new circular will also help advance the government’s aim to move towards a
national cashless payment system, and better control foreign currency flows.



The draft circular defines non residents as individuals
present in Vietnam for 12 months or less, who are currently working, undergoing
medical treatment, travelling for recreational purposes, or any employees of
foreign embassies, organisations and companies in Vietnam regardless of time
limit.



At present, the SBV is trying to alleviate pressure on interest
rates by increasing liquidity in the money market.



This has happened because the central bank has purchased more
foreign currencies to increase its reserves, according to a second quarter
report by the Vietnam Institute for Economic and Policy Research (VEPR).-VNA