New bank fee on cash deposits and withdrawals could backfire, experts say
New bank fee on cash deposits and withdrawals could backfire, experts say
Cardholders have been warned that they will have to pay fees when they deposit or withdraw cash from banks, according to a circular on cash service fees being drafted by the State Bank of Vietnam.
The draft circular says that credit institutions have the right to determine fees that account owners must pay when handing over cash to their accounts, provided the fees are not higher than 0.03 percent of the total cash value.
Credit institutions can also charge service fees to clients who withdraw cash. The fee must not be higher than 0.05 percent of the withdrawn cash.
Explaining the decision, the State Bank said it has been urged by the government to apply necessary measures to gradually reduce cash payment transactions.
The State Bank in the past released a circular stipulating a 0-0.05 percent fee charged on every cash-withdrawal transaction.
However, in reality, banks did not charge the fee and instead set up different fee levels, which are lower than money transfer fees.
As a result, people still prefer cash payment transactions, as Vietnam remains essentially a cash economy.
As anticipated, the draft circular has faced strong opposition from the public.
Thanh Huong, a worker in an industrial zone in Hanoi, said it was an unfair decision that cardholders have to pay so many kinds of unreasonable fees.
“Commercial banks must understand that when people hand in cash, banks will be able to mobilize capital from the public at very low costs. And they should not be too demanding,” Huong said. (The demand deposit interest rates now hover around 0.5-1 percent per annum – VNNet)
Nguoi lao dong quotes a report of the State Bank of Vietnam as saying that by the first quarter of 2014, over 48 million individual bank accounts have a balance of VND116.428 trillion. There are 68.5 million bank cards of different kinds, including 61.8 million domestic cards and 6.7 million international cards.
If the suggested cash service fees were applied, banks would pocket big sums of money.
However, not only individual bank account owners but also economists are against the plan to charge cash services.
Dr. Nguyen Van Thuan, finance & banking dean of HCM City Open University, said in Thanh Nien that the regulation, if approved, would put a heavy burden on low-income workers and students.
Since the day commercial banks began charging cash withdrawal transactions at ATMs (automatic teller machines), low-income workers have been going to banks instead of ATMs to withdraw money, which allows them to avoid the ATM fee.
But if the new regulation is approved, they would have no way to avoid the fees.
Thuan believes that it would be better not to charge fees on low income earners.
Meanwhile, current laws stipulate that all major transactions must be made via banks, so the new regulation is not really necessary.
Huynh Buu Son, a well-known economist, warned that the effort by the State Bank to encourage people to make non-cash payments would backfire because people would rather keep cash in their safes than deposit cash and pay fees to a bank.
vietnamnet
