Non-cash payment plan panned

The proposed limitations on cash payments for transactions, the total cash balance an organisation can keep overnight and the fees charged on cash transactions were all given the thumbs down.
The decree proposed that the maximum amount for a cash transactions at government administrative agencies was to be limited to VND5 million ($318) and for other businesses VND10 million ($637), regardless if they were state-owned, private or foreign-invested.
Payments above these amounts would have to be made in non-cash forms such as cheques, payment collection or transfer.
However, financial experts and trading businesses in particular, viewed the cap as too low given the current context of the Vietnamese economy.
“I agree that there should be limitations on cash payments, but a cap of $637 is far too low,” said the secretary general of Vietnam Insurance Association (VIA), Phung Dac Loc.
“There are many expenses where the total amount for one single transaction already exceeds the cap. Beneficiaries are often individuals without accounts at banks, such as maintenance workers, construction workers, retailers and farmers,” he said.
“Cash is also preferred for donations by charity funds, supporting losses occurred due to natural calamities, scholarship provision where amounts changing hands are higher than the small sum of $637,” he added.
Loc suggested the government should increase the above limitation and create different caps for different kinds of transactions as well.
In full agreement, Nguyen Minh Phu, director of Trans-Pacific Ltd. company, said that for trading enterprises the proposed amount was not realistic.
“In addition to large transactions that we of course do via banks everyday, we also make dozens of small and medium-sized transactions that are often more conveniently paid in cash,” said Phu. “The local banking payment system is not very developed so it would be time-consuming and troublesome to go to the bank for such small transactions.”
Phu proposed the cap for state administrative agencies be raised from $318 to $637, while the limits for other organisations should be abolished, at least until the banking infrastructure has adequately improved.
As far as the total cash balance that an organisation can keep overnight, the draft stated the State Treasury would decide the maximum cash balance that each state administrative agency can hold.
Businesses can decide their own cap before submitting to relevant government bodies such as the State Treasury and General Department of Tax (GDT) so that these bodies can monitor the businesses’ implementation.
According to Nguyen Thi Thuong Huyen, from the Financial Institute, it is unnecessary to stipulate such a rule and also impossible for the State Treasury to do regular checking on so many agencies across the nation.
“I think no business likes to keep much cash in hand as they all know it is risky,” she said. “They prefer to keep as little cash as possible depending on their actual need and the cash demand may vary from week to week, even from day to day. We therefore cannot, and should not, set a fixed amount.”
Huyen also pointed out that in schools, universities or hospitals, fee collection was mostly done by cash.
VIA’s Phung Dac Loc looked at the matter from a wider social perspective.
He warned that a possible shortage of cash for businesses, and in the society in general, might lead to a crisis of “change cheques for cash”, the scenario that rocked the country’s financial system a decade ago.
The new rule for charging a fee on account holders depositing and withdrawing cash from their accounts also stirred up opposition from the public.
Most Vietnamese banks do not charge such fees. Nguyen Ngoc Thach, a lawyer, claimed that charging fees would have an adverse impact as people would be discouraged from opening accounts at banks.
He added that Vietnam’s current low economic level and inadequate banking system did not leave room for such limitations on businesses.
In a reply, deputy director of the State Bank’s monetary policy department, Mai Van Ban, the main brain behind the draft decree, explained the draft was based on the experiences of neighbouring countries like China, adding that the limitation on cash payment in China is only RMB1,000 or $125, much lower than proposed cap in Vietnam.
He agreed, however, that the banking infrastructure should be strongly improved to back up payment services and he welcomed further comments from the public before the draft was finalised by end of this year.