Eight circumstances keeping cash away from banks

Wednesday, April 23, 2008
Since mid February, mobilised capital growth has been slowing down though commercial banks have offered high interest rates and launched big promotion programmes. Why?
Statistics show that by the end of the first quarter of 2008, the total mobilised capital of the whole banking system had increased by 5.48%, and total outstanding loans had increased by 10.8% over the end of 2007. The figures were 11.76% and 6.4% at the same period of last year.
At the Saigon Joint Stock Bank (SCB), the total mobilised capital saw a decrease of VND300bil in the last two weeks of March, and a further decrease of VND450bil in the first two weeks of April.
State owned banks, which have the biggest advantages in capital mobilisation thanks to their wide operation networks, prestige, are also facing the same situation.
In Hanoi, the total capital mobilised by state owned banks by early April had decreased by nearly 4% compared to December 31, 2007.
The Viet Nam Bank for Agriculture and Rural Development (Agribank) and Vietnam Bank for Foreign Trade (Vietcombank), which always lead in capital mobilisation, have reported the decreases of 13% and 6%, respectively, in mobilised capital.
State owned banks, which were once the biggest lenders on the interbank market, now have become borrowers. By the end of March 2008, state owned banks in Hanoi had borrowed 55% more money through the interbank market over the end of February.
In HCM City, by April 16, 2008, the banks’ mobilised capital had dropped by VND9,225bil over the end of March, of which the deposits of state owned banks had decreased by 1.74%, and of joint stock banks, by 0.28%.
Eight reasons have been cited to explain the problems.
First, the tightened monetary policies have been making it difficult for businesses to access bank loans. As a result, many businesses which have deposits at banks have drawn money out to lend to other businesses to get higher interest rates. People who have idle capital are not making deposits at banks anymore, but lending to their relatives and friends to serve those people’s investment projects.
Second, banks may face a capital shortage as the State Treasury is planning to withdraw VND52,000bil worth of government money from state owned banks.
Third, many institutions that are founding shareholders of other institutions to be organised have drawn money from banks to transfer to accounts to prove their financial capability.
Fourth, as the stock market keeps falling, OTC share prices are descending, which has made a lot of investors incur losses. Therefore, they have no money left to deposit at banks. Moreover, the deposits of securities companies at banks have been decreasing due to 1/ the losses incurred by the companies and 2/ lower balances in investors’ accounts at securities companies.
Fifth, as the gold price keeps increasing and the CPI remains high, people tend to inject money in gold instead of bank deposits. It is estimated that some 40 tonnes of gold have been imported to Viet Nam so far this year, worth $1.2bil. 60% has been sold on the market.
Sixth, as the real estate market has cooled down, investors cannot sell properties to take back capital; therefore, they do not have money to make bank deposits.
Seventh, people, hearing about the car import tax increase, have drawn money from banks to buy cars before the tax increase decisions become effective.
Eighth, the idle money among the public is nearly exhausted. People deposited at banks when the interest rates were high, at 13% per annum, and now they do not have more money to deposit. (TBKTVN)