The cash flow shows enigmatic things
The statistics released recently show many paradoxes in the finance & banking market
![](http://static1.vietstock.vn/indochinastock/images/2012/10/31/cash.jpg)
The State Bank of Vietnam has unexpectedly resumed its sale of notes to commercial banks after four months of interruption.
The noteworthy thing is that though the note interest rates have been decreasing continuously, especially short term notes (28 days), the sales have been very high, which shows that the cash has been running from commercial banks to the State Bank.
Analysts have predicted that a big volume of more notes would be sold on the market in order to attract money from commercial banks, which would serve the implementation of the plan to curb the inflation rate at the one digit level.
The fact that state bank notes have been selling well and that commercial banks have been the main buyers, makes people think that commercial banks now have excessive capital and that banks’ liquidity has been very good.
If so, banks may think of slashing the lending interest rates to make it easier for businesses to access bank loans, which would rescue a lot of businesses now in thirst for capital.
However, this is not true that commercial banks all have profuse capital and that the interest rates would be eased.
In the interbank market--the interest rates, overnight, one week and one month interest rates, have all been on the rise. There are two groups of banks existing, including the one with strong liquidity and the other, comprising of small banks, which are facing serious liquidity.
The small banks have been trying to improve liquidity by borrowing money on the interbank market at high interest rates and pushing up the capital mobilization from the public.
Doanh Nhan Saigon has reported that small banks now reportedly have to borrow 6-monh term loans on the interbank market at the interest rate of 12 percent per annum. Meanwhile, the ceiling deposit interest rate at which commercial banks can pay to seek capital from the public is 9 percent per annum.
In fact, the actual deposit interest rates banks pay to individual depositors are much higher, than the ceiling rate of 9 percent set by the State Bank, at 12.5-13 percent per annum.
The interest rate race among commercial bank always results in the fact that the cash would flow from the public to the banking system. That explains why the cash flow to commercial banks has increased by 11 percent in comparison with the same period of 2011. Meanwhile, the credit growth rate has reached three percent only by the end of October.
As such, the cash has been going from the public to commercial banks and then to the State Bank, while it has not reached out to enterprises to serve their production plans.
Economists said that the national economy has entered a new phase, when borrowers want to ease the debts; therefore, the credit has been increasing very slowly. The reports by commercial banks showed that the banks’ money have been injected in some non-credit fields, including the government bonds.
Buying government bonds is the solution chosen by the commercial banks with strong liquidity, because of the high safety of the securities, even though banks would be able to make higher profits if lending to businesses.
The money has not been going to the manufacturing sector simply because of the weak consumption demand.
The enterprises, which can satisfy the requirements for borrowing money, do not intend to borrow money right now. The others, which have found good business opportunities, cannot get new loans once they have not paid the old debts. Meanwhile, the businesses with a healthy financial situation only want to pay debts and do not plan to scale up production at this moment.
vietnamnet
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