The Vietnam Association of Financial Investors on Monday proposed that the central bank cut dollar deposit rates to zero to reduce the use of the foreign currency in the country.
The association, a group of 63 Vietnamese banks and funds, also suggested a new rule that would allow banks to impose a fee for keeping dollar holdings for their clients.
Vietnam's central bank on April 13 capped rates payable on dollar deposits in the US currency at 3 percent for individuals and 1 percent for non-credit institutions. Holdings of dong can earn interest of as much as 14 percent.
Nguyen Hoang Hai, general secretary of the Vietnam Association of Financial Investors, said dollar interest rates for economic institutions should be slashed to zero immediately. For individuals, the rates can be cut to 1 percent first, and then zero also, he said.
This proposal is an attempt to reduce dollarization of the economy and encourage people to switch to dong-denominated assets, the association said.
State Bank of Vietnam Governor Nguyen Van Giau said the current rate cap on dollar deposits has helped stabilize the currency market. Whether a further cut to dollar rates should be made needs to be considered carefully because such a decision would affect the whole economy, he said.