Headquarters of the State Bank of Vietnam in Hanoi (Photo: SBV) Hanoi (VNA) - The State Bank of Vietnam (SBV) iscollecting feedback on a draft circular that will, among other things, allownon-residents legally present in Vietnam to make term deposits in both VND andforeign currencies.
The central bank argues that the permission is a measure toprevent “hot money flows,” or flow of funds from one country to another to earnshort-term profit on interest rates differences, from entering theexchange market. It is also a way to ensure the legal rights of non-residentspresent in the country, it said.
The draft, released on July 4, has thus far received positivefeedback from commercial banks and other credit institutions. Directors at amajority of the banks consider the circular a significant improvement overprevious regulations, the SBV has reported. They said the new rules can helpattract another source of capital and utilise idle capital from expatriatesworking in Vietnam.
Furthermore, by allowing foreigners to switch from using a currentaccount in VND or foreign currency to using term deposits,authorities will also find it much easier to control the flow of capital fromthis group.
It is hoped that with interest rates on deposits in foreigncurrencies at zero percent, the five to eight percent interest rates fordeposits in VND will motivate more people to deposit their savings in the localcurrency.
The central bank said that previously, non-resident foreigners in Vietnamwere only allowed to open current accounts in VND or foreign currencies, so thenew circular will also help advance the government’s aim to move towards anational cashless payment system, and better control foreign currency flows.
The draft circular defines non residents as individualspresent in Vietnam for 12 months or less, who are currently working, undergoingmedical treatment, travelling for recreational purposes, or any employees offoreign embassies, organisations and companies in Vietnam regardless of timelimit.
At present, the SBV is trying to alleviate pressure on interestrates by increasing liquidity in the money market.
This has happened because the central bank has purchased moreforeign currencies to increase its reserves, according to a second quarterreport by the Vietnam Institute for Economic and Policy Research (VEPR).-VNA
The central bank argues that the permission is a measure toprevent “hot money flows,” or flow of funds from one country to another to earnshort-term profit on interest rates differences, from entering theexchange market. It is also a way to ensure the legal rights of non-residentspresent in the country, it said.
The draft, released on July 4, has thus far received positivefeedback from commercial banks and other credit institutions. Directors at amajority of the banks consider the circular a significant improvement overprevious regulations, the SBV has reported. They said the new rules can helpattract another source of capital and utilise idle capital from expatriatesworking in Vietnam.
Furthermore, by allowing foreigners to switch from using a currentaccount in VND or foreign currency to using term deposits,authorities will also find it much easier to control the flow of capital fromthis group.
It is hoped that with interest rates on deposits in foreigncurrencies at zero percent, the five to eight percent interest rates fordeposits in VND will motivate more people to deposit their savings in the localcurrency.
The central bank said that previously, non-resident foreigners in Vietnamwere only allowed to open current accounts in VND or foreign currencies, so thenew circular will also help advance the government’s aim to move towards anational cashless payment system, and better control foreign currency flows.
The draft circular defines non residents as individualspresent in Vietnam for 12 months or less, who are currently working, undergoingmedical treatment, travelling for recreational purposes, or any employees offoreign embassies, organisations and companies in Vietnam regardless of timelimit.
At present, the SBV is trying to alleviate pressure on interestrates by increasing liquidity in the money market.
This has happened because the central bank has purchased moreforeign currencies to increase its reserves, according to a second quarterreport by the Vietnam Institute for Economic and Policy Research (VEPR).-VNA
VNA
