A gold transaction at Tien Phong Bank in Ha Noi. The State Bank of Viet Nam would like to see banks close gold loans by encouraging clients to transfer gold into Vietnamese dong. — VNS Photo Truong Vi

HA NOI (Biz Hub) — Gold loans at commercial banks in HCM City at the end of February stood at 100,000 taels, down 28,000 taels, or 21.87 per cent, against the end of 2013, the central bank's City branch deputy director Nguyen Hoang Minh told the Thoi Bao Ngan Hang (Banking Times).

Given no harsh deadlines, the State Bank of Viet Nam would like to see banks close gold loans by encouraging clients to transfer gold into Vietnamese dong.

A senior official at Eximbank said that terms of gold loan contracts were quite long and clients often did not want to end contracts before their maturity.

Sharing similar views, representatives of Southern Bank said it is difficult to transfer gold loans to dong loans.

But the picture seems to improve when gold prices fall. At lower gold prices, clients would benefit from the lower values of gold loans. For instance, Phu Nhuan Jewellery Joint Stock Company (PNJ) closed gold loans worth VND567 billion (US$26.87 million) at Asia Commercial Bank and Sacombank.

Besides pushing to wipe the slate clean, banks also cut purchases of gold due to potential risks of movements of gold.

Statistics from the central bank's HCM City branch showed that buy/sell ratios at commercial banks in January were only balanced. Buy/sell volumes in 2013 were 6.5 million/6 million taels, while those in January 2014 were 206,037 / 217,538 taels.

In 2013, the State Bank of Viet Nam sold 1.82 million taels (69.9 tonnes) of gold during 76 auctions. The volume was largely sold to credit institutions to help close outstanding gold deposits. Other sales were made to gold firms to meet market demands.

The sales reduced local gold prices to VND34.6-34.7 million (US$1,641-1,646) per tael at the end of 2013, down VND12 million ($569.28) per tael, or 24 per cent against the year-end in 2012. Each tael equals 1.2 troy ounces. — VNS