Commercial banks in Vietnam have stopped offering new gold loans and lowered interest rates on deposits of the precious metal, following an order from the central bank.
Tuoi Tre newspaper reported on Thursday that all banks have put an end to new gold credit. They are now planning to collect outstanding loans.
Nguyen Huu Dang, general director of Ho Chi Minh City-based HD Bank, said there's a problem in that some loans are not due for another five or six years, and his bank doesn't know how to handle them.
Dang said he will wait for guidance from the State Bank of Vietnam.
Another banker, on the other hand, said his bank would try to convince clients with long-term gold loans to switch to dong loans. This approach, however, won't be easy because dong interest rates are now high.
The central bank at the end of April ordered commercial banks to stop lending gold and restrict deposits of the precious metal starting May 1. It said the move is aimed to reduce the use of gold as a payment tool in the economy.
Tuoi Tre said many banks plan to lower their interest rates on gold deposits further. HD Bank, for instance, already cut its rates to 0.7-0.8 percent per year from 1.2 percent.