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Gold bond issuance proposed
Experts have proposed to issue bonds in gold in order to use the huge capital now kept among people. Vietnamese people have the habit of keeping gold in their coffers, considering this the best way to preserve their assets.
Especially, people have rushed to purchase gold in recent days, when the gold price has been increasing continuously, and the high inflation rate has been threatening the Vietnam dong interest rates.
Meanwhile, according to the new Circular No.22 released by the State Bank of Vietnam, commercial banks are now not allowed to mobilize capital in gold. As the result, a huge volume of gold has been kept among people or in other words, it is out of circulation.
Experts have voiced the concern that if the society cannot use the huge volume of gold, now kept among people, as the capital for investment, it will be a big waste of the society’s resources. They believe that issuing bonds in gold is the most feasible solution to help use the huge capital for development.
Previously, commercial banks always tried to push for the gold mobilization, considering this a good capital mobilization channel. Especially, in the past, when gold trading floors operated, and the gold trading on foreign accounts were allowed, banks liked mobilizing capital in gold, because they had the right to convert 30 percent of gold capital into Vietnam dong in order to expand credit. Besides, banks could profit from the mobilized gold by selling and then purchasing it later, when the prices were more favorable.
However, after the Circular No.22 took effect, capital mobilization and lending in gold have been tightened. It is estimated that banks have mobilized 91 tons of gold recently.
Also, since the Circular No.22 was released, the gold interest rates have been decreasing to 0.2-1.5 percent per annum. As banks are only allowed to mobilize gold by issuing valuable papers, they have been issuing deposit certificates. This means that banks have shifted from mobilizing gold directly to mobilizing gold indirectly through issuing valuable papers.
However, a banker said that with the new circular, it is very likely that in the time to come, interest rates will not be paid for gold deposits. Meanwhile, depositors will have to pay storage fee to banks.
According to an economist, to date, 45 percent of people’s money have been kept in gold. Especially, in rural areas, only 24 percent of cash have been deposited at banks, while the remaining money has been put in foreign currencies and real estate.
If the Government issues bonds in gold, experts say, it will be able to attract a huge capital for the national economy. Meanwhile, as Government has gold in hands, it will be able to sell it to intervene in the market when necessary, while Vietnam will not have to spend foreign currencies to import gold.
Some days ago, in order to stabilize the gold market, the State Bank granted larger quotas on gold imports, hoping that enterprises and banks will sell more gold in order to satisfy the demand.
However, a banking expert said that it is better to issue bonds in gold than granting more quotas. “The bonds should have the face value of 0.1-0.2 taels and the interest rates should be 0.5-1 percent per annum,” the expert said.
Dr. Tran Hoang Ngan, Deputy President of the HCM City Economics University also thinks that the Government needs to issue bonds in gold, because the issuance will create liquidity for gold, while providing the state with more capital to run projects.
vietnamnet
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