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Central bank unable to resolve shortage of small bank notes
The Bank of the Lao PDR still has no specific measures to put more small denomination banknotes into circulation, even though it is aware the shortage could lead to higher inflation.
A senior official from the Currency Issuing Department said yesterday the central bank does not have a regulation that forces commercial banks to circulate small banknotes, which is contributing to the current short supply.
“Our regulations only stipulate that banks must provide the best services to customers,” the official said.
At present, most banks require only 50,000 kip and 100,000 kip notes because this makes it easier when paying cash withdrawals and dispensing money through ATMs. But the growing supply of large denomination notes is creating problems for shops, which have to provide customers with small change.
Shop owners are now setting prices based on the availability of banknotes, which means that prices are often higher than they should be. Some shops even give customers candies as change.
The bank official said that while the central bank could not force banks to circulate small denomination notes, they should be aware that this is part of their everyday banking services.
“These banks should adjust their ATMs so that they can dispense a wider range of banknotes,” he said, adding that bank staff should also give customers both large and small notes when handing over cash.
However, most people want large denomination notes as they are easier to carry around, so banks would not always be helpful by forcing customers to accept small notes.
Those who most need small change are salespeople, who range from grilled banana vendors to supermarket managers. Most small shop owners are unlikely to go to a bank to get small change on a regular basis.
In many countries, bank officials are given a large supply of banknotes including small denomination notes, to ensure that both large and small notes are put into circulation.
The central bank official said the Bank of the Lao PDR had no direct communication channel with the public so it was impossible to make small notes available to shop owners. In addition, it would be necessary to introduce a controlled method of transporting money from the bank into the community.
He said the role of the central bank is to communicate with commercial banks and agreed that a regulation is needed to ensure they distribute both small and large banknotes.
The central bank has only two regional branches, in Luang Prabang and Savannakhet provinces, so it is impossible to provide a direct public service as is the case in other countries.
vientiane times
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