The ratio of bad debt on the total outstanding loans in gold has been increasing rapidly, experts have warned.
The State Bank of Vietnam (SBV) initially intended to submit to the government the plan on mobilizing gold from the public in the second quarter of 2012. However, to date, the draft plan has not yet made public.
Meanwhile, the domestic gold price has always been far higher than the international price, while commercial banks still mobilize gold from the public and leave the capital idle in their coffers.
The glitter of gold
Commercial banks have been told that they would have to stop mobilizing gold from the public under the mode of short term certificates and pay gold back to customers no later than November 25, 2012.
Therefore, some banks including Eximbank and Viet A Bank, have slashed their gold deposit interest rates and they now only accept short term (1-2 month) gold deposits.
However, in an opposite move, some other banks have raised the gold deposit interest rates in an effort to attract more gold depositors.
Analysts have warned that the bad debt ratio in lending in gold now accounts for a relatively big proportion in the total outstanding loans. Therefore, if the State orders to stop mobilizing gold right now or in some days, banks would fall into the liquidity problem, which means that they would not have gold to pay to customers.
Some commercial banks reportedly converted the mobilized gold into dong and use the dong to lend to businesses and individual clients. They now have to rush to collect gold to pay for due deposits, while the deadline would come just in some more days.
Le Xuan Nghia, a well-known banking expert, former Deputy Chair of the National Finance Supervision Council, has also warned that if the central bank speeds up the process, commercial banks would incur losses, because they would have to spend big money now to collect gold. This would also widen the gap between the domestic and international prices – the thing that the central bank does not want to see.
There have been no official statistics about the volume of gold mobilized by the commercial banks from the public. Saigon Dau tu newspaper has found out from its sources that by the end of May 2012, the banks in HCM City had attracted 2.3 million taels of gold to the banks, worth 103 trillion dong. A bank had reportedly received the deposits of 1.3 million taels.
A banker has assured that the gold deposit balance has seen many big changes since May 2012 because of the gold price fluctuations. When the gold price exceeded the 47.4 million dong per tael threshold, people sold gold in big quantities to make profit.
The banker has also said a lot of his clients have converted their dong deposits into gold deposits.
The deadline extension proposed
As said above, the State Bank requested commercial banks to build up the roadmaps to stop the capital mobilization in gold by November 25, 2012.
However, experts said it is very difficult to stop mobilizing gold at this moment, when many banks still cannot collect all debts. In HCM City, the biggest gold market, hundreds of taels of gold have been reportedly not taken back yet.
The finance reports of a big joint stock company in HCM City showed that the accounts receivable, which by the nature, are the loans to be taken back had reached 559,297 taels.
Some experts have proposed the central bank to extend the deadline once more, so as to give banks more time to settle their liquidity problem. The bank has also been urged to speed up the plan to mobilize gold from the public to take full advantage of the huge capital source, estimated at 18-30 billion dollars, or 300-500 tons of gold.