VietNamNet Bridge – As of September, bad debt in the banking system had dropped to 2.9%, a steep fall from 17.43% recorded in the same month in 2012, according to a Government report sent to the National Assembly (NA).

Illustrative image -- File photo

Nguyen Van Binh, governor of the State Bank of Vietnam (SBV), said at a NA meeting on September 29, 2014 that total bad debt was estimated at VND500 trillion (US$22.4 billion) but he did not unveil the record date.

However, the Government admitted in the report that bad debt has not been settled thoroughly. Commercial banks are required to set aside a lot of money for risk provisions including bad debts sold to Vietnam Asset Management Company (VAMC), and this has affected the operations of banks and State budget collections.   

According to another report presented by Nguyen Van Giau, chairman of the NA Economic Committee, bad debt settlements have been encouraging and the number of ailing banks has dropped.  

But experts said though the economy has recovered, local enterprises are still mired in difficulties and therefore, bad debt settlements will likely remain tough. They proposed reviewing the operation of VAMC and making the mechanism and policies for acquiring ailing banks at VND0 transparent.     

SBV deputy governor Nguyen Kim Anh told a review conference on bad debt settlements for the banking system in Hanoi early this month that from 2012 to the end of August this year, credit institutions handled VND424.14 trillion worth of bad debt, equivalent to 91.2% of total bad debt recorded in September 2012. Of which, VAMC was responsible for 41.3% and credit institutions for the remainder.  

According to a Financial Sector Assessment Program (FSAP) report of the World Bank and International Monetary Fund released at the end of 2014, Vietnam’s non-performing loans climbed to 12% at the end of 2012, pushing the capital adequacy ratio (CAR) at some domestic banks down sharply. Banks were exposed to high credit risks.  

The bad debt ratio of less than 3% is normal according to international practice and proved the central bank’s effort has borne fruit. However, lending rates in Vietnam have stayed high and many businesses told the Vietnam Chamber of Commerce and Industry that it is hard to take out bank loans.

SGT