Black market is still bustling with change, banks say there is a shortage

There are 3 weeks left until Lunar New Year 2018. Normally, near Tet, the demand for small denominations of 20,000 VND or less from businesses and people is very large. And this is also the time when the State Bank often pumps a large amount of small denominations into circulation (small denominations here are coins that meet the standards for circulation, not new coins to serve the needs of Tet lucky money).

Banks are short of small change.

However, in recent days, according to banks' feedback, most commercial banks in Ho Chi Minh City and the southern provinces do not have enough small denomination money to serve the needs of people and businesses.

A treasury officer at a bank shared that many banks in the southern region are short of notes with denominations of 20,000 VND or less, and some banks do not even have enough notes of 50,000 VND to top up ATMs, let alone exchange them for customers. Banks only dare to keep small denominations to return to customers, not enough to meet the demand for exchanging money.

According to this bank official, this is a strange phenomenon in recent years. Every year, the State Bank of Vietnam still has a policy of limiting small denomination money but it is not so scarce.

At the end of the year, the demand for small denomination money from businesses, small traders and people is often very large. The purpose of using small denomination money is to pay salaries (for businesses and small establishments that have not paid salaries through the bank), to give change to customers when doing business, buying and selling goods for Tet,...

The scarcity of small denominations in banks will certainly affect the market, businesses and the buying and selling activities of customers and people. Because small denominations play a very important role in the flow of money, especially during the time near Tet, the demand for change in small denominations is very large.

According to the explanation of a senior bank official, the reason for this scarcity is partly because small denomination money (denominations of 20,000 VND or less) has been circulating for a long time, and a lot of money does not meet circulation standards such as being torn, faded, etc., especially polymer money with denominations of 20,000 VND and 10,000 VND. Therefore, small denomination money returned by residents to commercial banks and commercial banks to the State Bank is often not qualified for circulation, so it cannot be supplied back to the market. Meanwhile, the amount of new small denomination money is scarce according to the Government's policy of reducing the cost of printing new small denomination money in recent years.

With the phenomenon of local scarcity, the psychology of banks and customers is to keep small denominations to meet their needs, but in reality they do not use them all. When the circulation is blocked, it will inevitably lead to small denominations in circulation becoming more scarce when in recent years the State Bank has restricted the printing of small denominations.

Money exchange is still bustling on the black market.

While banks complain of a shortage of small change, the black market still has places to exchange small change at high fees.

On social networks, money exchange is advertised openly with a difference of 5-20% depending on the denomination of the money, even 50%-70% if the denomination is 1,000 VND or 500 VND. Contacting a small change exchange point on Facebook, the owner said that they can have as much as needed, as long as you order in advance and maintain your reputation.

Meanwhile, outside, especially near temples and pagodas, the money exchange is less public than in previous years, but it is still not difficult to exchange money. Instead of publicly announcing the difference as in previous years, many places exchange money at the same denomination for the exchanger but require the exchanger to buy offerings or fruits at a higher price than usual. Thus, the money exchange fee will "eat" into the price of the goods that the exchanger sells.

On the streets famous for money exchange in Hanoi such as Nguyen Xi and Dinh Le, people who need to exchange money have no difficulty in exchanging money. Ms. Hanh, a long-time "contact" for money exchange in this area, said that exchanging small bills this year is more difficult but can still be arranged. If you have a "familiar contact", you only need to make an appointment 1-2 days in advance and you can arrange whatever you need.

Need to clear the flow of small denomination money

Returning to the flow of small denomination money in banks, a treasury manager of a bank commented that although the State Bank has currently pumped a quantity of newly printed money into the market to serve the people's need to exchange new money. However, newly printed small denomination money only serves the need to exchange lucky money and does not solve the problem of the need to use small change to pay back in trade, making the situation of small change even more scarce.

This person suggested that the lack of supply of small denomination money to the market will have a certain impact on the buying and selling activities and transactions of the people. Therefore, the State Bank and commercial banks need to promptly regulate and handle this situation to meet the needs of the people during Tet, such as re-injecting the amount of small denomination money that has been circulated into places with great scarcity such as the Southern region to avoid the mentality of people seeing the scarcity and continuing to hoard while having no need to use all the small denomination money they have.

Businesses, business households, and small traders - those who sell directly to customers - need to quickly transfer the amount of small denomination money that exceeds their needs into accounts opened at commercial banks. Businesses and people need to avoid the fear of not having enough small denomination money and continue to hold large amounts of small denomination money.

The authorities need to deal more strictly with the buying and selling of small denomination notes for profit. Only then can we solve the current shortage of small denomination notes.