Black market vendors stain New Year rite
Over the past few years, the State Bank of Vietnam has been setting aside great amounts of fresh bills to meet the local demand of giving banknotes to children and donating money to temples for the New Year, allowing people to exchange banknotes without a surcharge at commercial banks.
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However, bank personnel have been taking the fresh bills to the black market instead, where they can pass them on at a profit. This may partially explain why banks are seemingly out of fresh bills while black market vendors are confident in meeting large orders – as well as the State Bank of Vietnam’s (SBV) attempts to put a stop to fresh-cash services.
With more than a month remaining until the Lunar New Year, locals are increasingly looking to exchange worn banknotes to fresh ones and black market vendors are appearing in droves.
Most fresh-cash vendors offer home delivery for VND30,000-40,000 (US$1.3-1.4) across the country. Thus, with the high demand for fresh banknotes, there are plenty of services ready to meet the demand.
“Customers only need to add the number of bills they want to purchase and the vendors will ship their orders within the same day if customers are in the city or in 2-3 days if customers are in another city or province,” a vendor in Ho Chi Minh City told VIR.
Many vendors even offer alternative payment methods, such as transferring money through bank or paying by card.
Violations spreading
Exchanging fresh banknotes at a charge is illegal in accordance with Decree No.96/2014/ND-CP on violations and fines related to money and the banking sector. Accordingly, fines fluctuate at around VND20-40 million (US$869-1,739), which is apparently not enough of a threat.
In fact, exchanging old banknotes for new ones is common practice on the local black market and is the best option for locals as most banks do not have enough supply of fresh notes.
Discussing with VIR, a representative of GP Bank said that the bank only allows the exchange of fresh bills for its loyal or VIP customers.
“The staff only get a few bills to hand out to loyal and VIP clients. The bank’s store of fresh bills has been reducing in the past years,” he added.
Meanwhile, most fresh bill vendors claim that they have plentiful supply of fresh banknotes directly from banks and that the notes have never been in circulation and have consecutive serial numbers.
Specifically, www.doitienmoionline.com, a fresh banknote exchange website, promises holding plenty of fresh bills supply and charges a commission of 3-8% depending on the denomination and the date of issuance. For instance, 8% rate applies for VND1,000 bills and 3% for VND500,000 bills.
Over the past years, the local custom of donating money to temples for good luck has brought about a boom in the demand for fresh banknotes. At the beginning of each year, it is not hard to find vendors hawking fresh banknotes around temples and pagodas without permission.
E-payment as a solution?
To limit violations, the SBV has halted the issuance of fresh bills of small denomination since 2013. The central bank stated that not issuing new bills for the 2018 Lunar New Year helped the bank save VND280 billion (US$12.2 million).
According to economist Can Van Luc, in addition to saving the cost of bill issuance, the SBV also saved on bill management.
Regarding solutions, Luc told VIR that it is the time for market regulators to look deep into illegal fresh bill exchange. After catching the first few vendors, the rest will likely withdraw.
In the last Lunar New Year, the SBV required all of its branches to hold absolutely no reserves of fresh bills directly transferred from the central bank to serve individual or organisational purposes which do not serve monetary circulation.
“Branches need to prevent and strictly punish personnel caught using their position to seek profit while putting money into circulation,” Dao Minh Tuan, SBV deputy governor, directed the banking sector early this year.
Answering VIR’s questions about whether e-payment, by reducing overall demand for physical currency, could halt violations in the black market, Luc also said that it has yet to replace cash and has little effect on black market dealings. “E-payment and cash payments have to run at the same time,” Luc added.
“The government already has a project to boost e-payment and will carry it out next year by promoting digital economy, e-banking, and e-finance. However, Vietnam needs a long-term strategy to apply these technologies because of deeply ingrained local customs like giving out money during the Lunar New Year,” Luc said.
Luc believes that as cash payment dominate in Vietnam and the custom of donating money at temples and pagodas will not be limited in such a short time, black market bill changing will persist for a long time.