Foreigners may be allowed to deposit savings in Vietnam
According to a draft circular of the State Bank of Vietnam (SBV), foreigners will be permitted to deposit savings in VND and foreign currency at commercial banks in Vietnam.
This draft circular is now in the process of taking comments from relevant agencies.
The central bank argues that the permission is a measure to prevent “hot money flows,” or flow of funds from one country to another to earn short-term profit on interest rates differences, from entering the exchange market. It is also a way to ensure the legal rights of non-residents present in the country, it said.
Under this circular, legal foreign persons present in Vietnam in the form of branches, representative offices, executive offices, operation offices, diplomatic missions and consular representations can deposit under certain terms to serve their activities in Vietnam as non-residents.
Non-residents are individuals who are present in Vietnam, including foreigners residing in Vietnam for less than 12 months; foreigners studying, treating diseases, traveling or working for representative offices, executive offices, operation offices, diplomatic missions and consular representative agencies of foreign legal persons in Vietnam.
According to the State Bank of Vietnam, the regulations allowforeigners to deposit savings in VND, foreign currency at commercial banks in order to limit hot capital flows and speculation in the money market, as well as guarantee legal benefits for non-residents who are present in Vietnam.
To deposit savings at commercial banks in Vietnam, non-resident foreigners can only use VND, foreign currency in their VND and foreign currency payment accounts. This regulation aims to ensure compliance with the policy of developing non-cash payment and foreign exchange management objectives, facilitating the management and supervision of state management agencies.
Experts said that if this circular is issued, it will be a big step forward. Because in an era when the "flat world" and "global citizens" are trends, barriers in livelihoodamong nations must be removed.
The draft, released on July 4, has thus far received positive feedback from commercial banks and other credit institutions. Directors at a majority of the banks consider the circular a significant improvement over previous regulations, the SBV has reported. They said the new rules can help attract another source of capital and utilise idle capital from expatriates working in Vietnam.
Furthermore, by allowing foreigners to switch from using a current account in VND or foreign currency to using term deposits, authorities will also find it much easier to control the flow of capital from this group.
It is hoped that with interest rates on deposits in foreign currencies at zero percent, the five to eight percent interest rates for deposits in VND will motivate more people to deposit their savings in the local currency.
At present, the SBV is trying to alleviate pressure on interest rates by increasing liquidity in the money market.
This has happened because the central bank has purchased more foreign currencies to increase its reserves, according to a second quarter report by the Vietnam Institute for Economic and Policy Research (VEPR).
Nguyen Nam, VNN