The State Bank of Vietnam (SBV) has unexpectedly resumed its sale of notes to commercial banks after four months of interruption.
Only 6 trillion dong worth of notes has been sold after four auctions, a very modest figure if compared with the sold volumes in the first months of the year. These notes have shorter terms (28, 56 and 91 days), while the notes issued earlier this year had the terms of 182 days at the longest.
The notes’ interest rates are between 4.5 and 6.5 percent per annum, which was equal to the notes’ interest rates defined at the bids in late second quarter of the year, but is relatively low if compared with the bids in March 2012, when the interest rate climbed to 12 percent per annum.
The above said interest rates are equal to the current average interest rates on the interbank market.
It is obvious that the central bank issues notes with an aim to withdraw money from circulation. However, the move by the central bank still causes a surprise to many people, because the issuance is carried out at this moment, when the credit has been growing very slowly, and the deposit interest rates have been on the rise.
Meanwhile, some observers believe that the central bank has every reason to issue notes now. It needs to withdraw money from circulation, while banks need somewhere to inject money in, as they have capital abundant.
The reports showed that the mobilized capital in the first nine months of the year increased by 12 percent over 2011, while the outstanding loans increased by 2 percent only. The disbursement has been going very slowly since the beginning of the year partially because very few clients can satisfy the banks’ requirements to be eligible for loans.
Meanwhile, banks, which can see the high inventories and the bad performance of the national economy, dare not to provide loans in big quantities. The high bad debt ratio has also been cited as an important factor that hinders the credit growth.
The interbank has also been very quiet over the last many months. The banks, which have capital in excess, cannot find the borrowers in the market, because the borrowers cannot meet the requirements on collaterals, while the interest rates have dropped sharply.
The Circular No. 21 by the State Bank which stipulates strict regulations on the lending in the interbank market has made a lot of small banks unable to seek capital from other banks.
Injecting money in bonds also proves to be an important investment channel for banks. However, the attractiveness of the different types of bonds is different.
The Bank for Social Policies has witnessed eight unsuccessful auctions. The Vietnam Development Bank organizes bids occasionally. Only the government bonds issued by the treasury really attract banks. It is simply because the bonds issued by the Bank for Social Policies and the Vietnam Development Bank had the interest rates lower than that of the government bonds, even though they had higher risks.
Observers said most of the banks have invested sufficiently in bonds, and they do not have the demand for more bonds. Banks do not intend to pour money into bonds any more, because bonds are long term debenture, while they only have short term capital.
That explains why, observers said, only big banks with profuse capital, can pour money into bonds.
Other banks would prefer injecting money in short term notes, which fit their short term capital.
The observers also believe that the central bank sells notes to neutralize the amount of Vietnam dong it pumped before into circulation when it bought foreign currencies in big quantity recently.