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Deposits down; bankers fear dong shortage
HCM City banks saw deposits as of end-May has fallen by 1.75 per cent since December 31 to VND792.2 trillion (US$36.64 billion).
Outstanding loans were up 5.62 per cent at VND748.9 trillion ($36.53 billion).
Dong deposits saw a fall of 7.2 per cent while US dollar deposits rose by 125 per cent.
This falling trend in dong deposits has also been seen country-wide, resulting in an overall fall in deposits.
Many bankers admit that this year deposit growth has been much lower than loan growth though many banks violated the central bank's 14 per cent deposit interest cap and offered rates of even 19 per cent.
They say since getting dong deposits has become so difficult, cutting interest rates on them has become impossible.
The question is if there is actually a shortage of dong.
Nguyen Huu Viet of IRS Securities Company says the dong shortage is due to many reasons, one of them being the huge amount of loans – worth hundreds of trillions of dong – outstanding from the real estate sector.
Meanwhile, the housing market is in a deep slump from which it shows no signs of recovery. As a result, housing developers are unable to raise the money they need to repay their loans or develop new projects.
The sky-high credit growth in recent years, of 38 per cent in 2009 and 31 per cent in 2010, are also a reason for the dong shortage because some of the loans have not yet fallen due or have already become bad debts, Viet explains.
Phan Dung Khanh of Kim Eng Viet Nam Securities Company says many firms made losses because of the economic turndown and so did not have the means to repay bank loans.
Cao Sy Kiem, Chairman of the Small and Medium Enterprises Association, says people are hanging on to cash and not depositing in banks or investing elsewhere because of their fear of rising inflation, and are waiting for deposit interest rates to rise to avoid losses.
Economists say that when the Government tightens monetary policy like it has now, the feeling of a shortage of money is easy to understand.
The central bank keeps draining liquidity from the market to combat inflation, they say.
However, in May it pumped VND20.6 trillion ($1 billion) to buy $1.2 billion to supplement its reserves and partly ease the dong shortage.
vietnamnet, VNS
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