Cash flowing out of banks, pouring in gold

When asking commercial banks to reduce the deposit interest rates, policy markers reassured them that the deposits would keep rising, because people would have no other choice for their idle money. However, the prediction has not come true.

Observers say that they can see the tendency of bank deposits moving from small banks to big banks, and from banks to other investment channels. A lot of depositors feel unsatisfactory when the deposit interest rates have gone down to 14 percent per annum at maximum, which is not high enough to offset the consumer price increases. Therefore, they now think of withdrawing money from banks to buy gold, real estate, dollars or inject in securities.

As all the banks, both small and big, are now offering the same interest rate of 14 percent per annum for all types of deposits, small banks have lost their effective competitiveness – the high interest rates. Therefore, it is understandable why depositors now tend to withdrawn money from small banks to deposit at big banks to avoid risks.

Small bankers have admitted that it is very difficult to retain depositors these days, because they cannot offer high interest rates to attract depositors any more. ABBank and Western Bank have decided to “dodge the laws” by launching flexible credit products, with which the interests of the deposits are calculated every day.

The depositors, who use these products, would enjoy the actual higher interest rates than the quoted rate of 14 percent. It is because the interest is added to the capital every day instead of the end of the deposit terms, which makes the sums of deposits bigger, thus allowing to bring higher interests to depositors.

Vu Tu, General Director of Tien Phong Bank, said that though the bank still can see high growth rate of deposits, but the growth proves to be unstable. “People still keep listening for the news and for the new moves to be made by the State Bank. Therefore, they mostly make short term one-week deposits,” Tu said.

He went on to say that many people, who have idle money, are trying to seek profits in other investment channels such as securities, gold and foreign currencies.

Local newspapers have reported that people are rushing to buy gold, even though the domestic prices are 1.4 million dong per tael higher than the world’s prices. The continued gold price fluctuations and the uncertainties in many places in the world have made people believe that pouring money into gold would bring fat profits.

As such, not only small banks, but big banks also have to worry about the decreases of the deposits, as people now can find a new good investment channel. The gold price, which is now hovering around 46.65 million dong per tael, proves to be attractive enough for people, who believe that the gold price would increase further, and if they buy gold at this moment, they would make fat profits in the future, when the gold price increases.

SJC, PNJ and SBJ, the biggest gold brands in Vietnam, all have reported the sharp increase in the trading volume in the last week and the first days of this week. Especially, the price of the precious metal once surpassed the 47 million dong per tael threshold.

Nguyen Thi Cuc, Deputy General Director of the Phu Nhuan Jewelry Company (PNJ) reported that the purchasing power has increased sharply, while the buyers include the people, who buy gold with the money they have withdrawn from bank deposits. On September 16 alone, PNJ sold 5000 taels of gold (a tael is equal to 1.2 oz).

Cuc has noted that as the interest rate has gone down to 14 percent per annum, people find deposits not attractive enough; therefore, they would rather to use idle money for other purposes than making deposits.

Tran Phuong Binh, General Director of Dong A Bank, has confirmed that the capital inflow to banks has slowed down, while he has seen the deposits decreasing by tens of billions of dong per day, because a lot of people have put money into gold instead of deposits.

Tags: vietnam gold, Vietnam gold market, Vietnam gold prices