A customer exchanges foreign currency at a VPBank branch in Ha Noi. Circular No 15/2015/TT-NHNN on foreign currency transactions by credit institutions took effect yesterday. — VNS Photo Truong Vi

Circular No 15/2015/TT-NHNN on foreign currency transactions by credit institutions, which was issued last Friday, took effect yesterday instead of waiting for the usual 45-day grace period following approval.

The circular was the second step taken by the central bank in the past few weeks to avoid speculation and hoarding of US dollars in the domestic economy.

Early last week, the central bank also issued a decision to cut the interest rate ceiling on dollar deposits offered by commercial banks to organisations and companies from 0.25 per cent to zero per cent per year, while the rate for individuals was reduced from 0.75 per cent to 0.25 per cent per year.

Circular 15 states that foreign currency transactions with banks must be accompanied by documents proving the purpose, amount and duration of payments.

If customers need to settle with partners within two working days, banks can sell foreign currencies immediately.

When the payment term is more than three days, banks are only allowed to sell forward exchange. For forward exchange transactions, the maximum term is 365 days.

The circular also mandates that the last day of forward exchange cannot be two working days before the due date of the enterprises' payment.

The forward exchange rate between the Vietnamese dong and US dollar during the transaction period will be defined by the parties' agreement but will not exceed the rate determined on the date of the transaction.

According to the central bank, in August and September, the USD/VND exchange rate was highly volatile, and there was a significant increase in US dollar deposits. This reflected the speculation and hoarding of foreign currency by many enterprises who wished to avoid the risk posed by increasing exchange rates, even though their payments were not due.

As a result, at the end of September, the central bank decided to cut the ceiling interest rate on dollar deposits paid to organisations and companies to zero per cent to encourage the conversion of dollar deposits into dong deposits.

Experts forecast that the adjustment would not affect the dollar source at commercial banks.

According to Deputy Chairman of the National Financial Supervisory Commission Truong Van Phuoc, commercial banks can buy more dollars as organisations and individuals who are holding onto their dollars can turn part of their dollar deposits into dong deposits to obtain higher interest rates. Currently, the interest rate on dong deposits is roughly 5-7 per cent per year. — VNS