From March 1, State-owned enterprises will have to switch to non-cash payments as stipulated by a recent Government decree, under which organisations and individuals using public funds will be prohibited from making payments in cash unless permitted or required by the Ministry of Finance and the State Bank of Vietnam.

Non-cash payments will become the norm also for securities transactions on the stock exchanges as well as outside of the trading system.

Cash will not be permitted to be used for any financial transaction including capital contribution, sale and purchase of shares, and lending and borrowing between enterprises.

The new decree also requires credit institutions seeking to disburse cash to borrowers to do so in accordance with the SBV regulations.

The issuance of the decree is part of the Government's ongoing efforts to popularise non-cash payments.

The non-cash payment project (or Project 291), launched in 2006 by the central bank and related ministries and agencies, has so far yielded encouraging results.

The central bank has established a modern inter-bank electronic payments system linking all the 63 provinces and cities that can meet the gradually increasing requirements of the economy.

Most banks have established core banking systems and internal payment systems based on advanced technologies.

As a result, non-cash payment through banks has become rapid, secure, and accurate.

Banks have focused on non-cash payments through electronic means of payment and payment via cards and online, which are constantly expanding, enabling e-commerce development.

According to official data, employees of most state agencies receive their salaries through bank accounts. This is a sector considered as a model for boosting non-cash payments.

This is also a key way of improving the quality of bank payment services, thereby reducing cash flows in the market and saving costs and reducing risks.

However, in spite of the encouraging results, the development of Project 291 has remained slow and beset by difficulties: technical infrastructure remains at development process; ATMs are mainly used to draw cash; other types of money transfers are mainly done through the banking system; and points of sales are not well developed.

In the public sector, a large portion of transactions between firms are still done in cash.

Even in cities, where there are favourable factors enabling non-cash transactions at places like supermarkets, malls, and elsewhere, the use of cash remains very popular because of people's habit and psychology.

Project 291 envisages that by 2015 the proportion of cash transactions in the economy will fall to less than 11 percent, and the proportion of people with bank accounts will increase to 35-40 percent of the population.

Clearly, the Government and banks need to make greater efforts to remove the obstacles to achieving the targets.-VNA