Cash withdrawal is a normal measure taken by the State Bank of Vietnam (SBV) when the banking system shows excess liquidity, said economists, referring to the central bank’s recent issuance of nearly VND10 trillion ($411 million) of treasury bills.
Dr. Can Van Luc, chief economist at state-controlled bank BIDV, said amid the system’s abundant liquidity, the SBV withdraws money to partially keep interbank interest rates at more appropriate levels, indirectly supporting the stabilization of exchange rates.
“This is a normal operation of the SBV, but whether it will continue to issue bills or not depends on liquidity among banks,” he emphasized.
Sharing the same opinion, Dr. Le Xuan Nghia, a member of the National Financial and Monetary Policy Advisory Council, said that commercial banks currently have excess working capital but cannot lend to customers.
The central bank’s money withdrawal mainly aims to remove difficulties for some commercial banks with a surplus of working capital which was mobilized at relatively high interest rates, he noted.
Affirming this is a normal activity for central banks, he added that $411 million would not have much of an impact on the entire market but could reduce pressure on exchange rates.
When the system's liquidity is in excess, the SBV’s net withdrawal should be considered in correlation with exchange rate developments, according to FiinGroup, a leading Vietnamese financial data provider.
This move shows that the central bank is willing to intervene to "cool down" exchange rates and is expecting to retain foreign cash flow lined up to be withdrawn or creating a boost for foreign cash flow waiting for disbursement, it added.
The SBV said on Thursday that it had issued nearly VND10 trillion ($411 million) of treasury bills via auction with the winning interest rate of 0.69% per year. The bills have a term of 28 days from September 21, with the interest rate paid once at the beginning of the period.
This was the first bill issuance by the SBV in more than six months (from March 10). Newly released data from the SBV showed that credit is still growing very slowly, reaching only 5.56% in the year to September 15, up slightly from a 5.33% increase at the end of August, while the target set for the year is 14%.
Vietnam’s credit reached about VND12,560 trillion ($522.14 billion) in the year to August 29, up only 5.33% from the end of last year, said standing Deputy Governor of the State Bank of Vietnam (SBV) Dao Minh Tu on September 7.
The figure was low compared to an increase of 9.87% in the same period last year. A major reason is economic difficulties persist, leading to low credit demand for business expansion and investment activities.
"The supply of credit to the economy has still faced difficulties as businesses cannot absorb capital and do not want to borrow money," Tu noted.