State Bank hopes gold will lose its sheen in Viet Nam
State Bank hopes gold will lose its sheen in Viet Nam
The State Bank of Viet Nam has no plan to import gold any time soon since the metal is neither an essential item nor benefits the economy, Deputy Governor Le Minh Hung has said.
The Government had decided not to stabilise gold prices or spend foreign exchange to import it also to discourage the practice of investing in gold and stop its use in commercial transactions.
The latter phenomenon is akin to dollarisation in an economy where people prefer to use dollars instead of the country's own currency.
The central bank issued a Circular ordering banks to stop accepting gold deposits and return all the gold to depositors by November 25. But it later deferred the date to June 30, 2013.
Hung said the SBV's ban on gold deposits was because it was a very high-risk business.
The high interest rates on gold deposits encourage to buy and use the metal, and the country has to spend large amounts of foreign exchange to import it.
Hung said the Government's new policy was to treat gold similar to foreign currency.
Gold will be bought and sold by enterprises and banks instead of being lent and borrowed as it is now, with the Decree stipulating that these transactions will be implemented through authorised enterprises and credit institutions.
The public is allowed to possess and trade the precious metal with the authorised firms.
Hung said they can go to banks for the safekeeping of their gold, leaving them in safety deposit boxes for a fee.
Banks would buy from and sell gold to individuals, and the central bank would buy from the banks.
Since the central bank no longer had the task of stabilising gold prices, it would buy when they went down to improve its reserves, and sell when they rise.
It would also export the metal to increase its foreign currency reserves.
With this treatment for gold, the precious stone will be regularly transformed into dong to be injected into the economy.
Gold deposits and loans at banks have fallen by 50 per cent, which has helped ensure banks have enough dong liquidity.
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