Aaron Batten from ADB commented that the NPL settlement process seems to be going more slowly. The NPL ratio in official reports decreased to 2.3 percent of total outstanding loans by the end of 2017, just a little lower than the 2.5 percent by the end of 2016.

A part of bad debt has been transferred from the banking system to the Vietnam Asset Management Company (VAMC). The bad debts that both commercial banks and VAMC are holding, plus latent bad debts, had reached 7.9 percent of total outstanding loans as of the end of 2017, while the figure was 10.1 percent by the end of 2016.

Agreeing with him, Sebastian Eckardt, chief economist of WB Vietnam, said the top priority task is to deal with the existing problems in asset quality in the banking sector. The NPL ratio was equal to 2.3 percent of the banks’ total assets in December 2017.

However, the figure can only reflect some of challenges in asset quality in the banking system, because this doesn’t include the bad debts being held by VAMC.

Meanwhile, the statistics cited by VAMC’s general director Doan Van Thang showed that the NPL ratio of the entire banking system had dropped from 3.61 percent at the end of 2013 to 2.18 percent by the end of July 2018. 

VAMC has collected VND100 trillion worth of debts, including VND30.852 trillion in 2017, nearly equal to 2/3 of the total debt value collected in the four years before. This is attributed to the promulgation of the NA’s Resolution 42 which gives more power to banks to accelerate the debt collection process.

VAMC has also been buying debts in accordance with the market price with the total purchased value of VND3.1 trillion. It has foreclosed on six mortgaged assets to collect debts.

Caution is parent of safety

Vietcombank’s Q2 financial report showed that the bank’s outstanding loans had increased to VND602.052 trillion by June 30 from VND543.434 trillion by the end of 2017, while the bad debt ratio had increased to 1.15 percent from 1.14 percent.

VietinBank also reported outstanding loans increased to VND867.566 trillion from VND790.688 trillion and the NPL ratio increased to 1.29 percent from 1.14 percent.

Other banks have also reported bad debt ratio increases.

Nguyen Tri Hieu, a renowned economist, commented that in general, once outstanding loans increase, bad debt will also increase. He said the bad debt increase is not a big problem for now, but it is still necessary to keep close watch over the lending, because caution is the parent of safety.

US$1=VND22,000

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