Vietnam's bad debt stays at 2.78 pct in May: central bank

Non-performing loans (NPLs) as of the end of May accounted for 2.78 percent of Vietnam's entire banking system's total outstanding loans, according to Vietnamese central bank on Thursday.

The level was still under the three-percent threshold targeted by the government, local Vietnam News quoted Deputy Governor of the State Bank of Vietnam Nguyen Thi Hong as saying.

The central bank would still consider the handling of bad debts a top priority during the last few months of the year, Hong said, adding that besides a strict control on credit growth to ensure credit quality and to avoid raising new bad debts, credit institutions have been asked to make provisions for their risky loans.

In July, financial statements released by some large commercial banks showed that their bad debts increased in the first half (H1) of the year, including Eximbank (5.3 percent), Bank for Investment and Development of Vietnam (2 percent), and Sacombank (2.83 percent).

Experts attributed the increase in bad debts of banks in H1 to the fact that the state-owned Vietnam Asset Management Company (VAMC) which is established to deal with bad debts, bought only a small amount of bad debts in H1. It meant that the new bad debts that arose in commercial banks in H1 remained with the banks, instead of being transferred to the VAMC, as was done in previous years.

The central bank reported in April that the bad debt ratio of the entire banking system as of the end of March was 2.62 percent. Endit