Vietnam can deal with bad debts, but it would not be an easy task, said Governor of the State Bank of Vietnam (SBV) Nguyen Van Binh at a National Assembly discussion on November 13.

Vietnam can deal with bad debts, but it would not be an easy task, said Governor of the State Bank of Vietnam Nguyen Van Binh

According to the Governor, the risk of bad debts increased from August 2011.

Bad debts have continuously been rising since 2008 and by the end of October this year, the rate stood at 66%.

As of September 30 this year, total bad debts held by Vietnamese banks reached VND119.14 trillion (USD5.7 billion), about 4.93% of their total outstanding loans, however, the SBV said the real rate was around 8.82%.

Fast credit growth over the past period was among the causes of rising bad debts, Binh noted.

Many credit organisations reported their bad debt rate from just 1-3%, but inspections have found the real levels to be more than 10%, Binh said, emphasising that credit organisations must set up hedge funds in the context of fast-growing bad debts.

VND12 trillion bad debts settled

Since early this year, credit organisations have established hedge funds totalling VND14 trillion (USD666.7 million), raising their fund value to date by VND75 trillion (USD3.56 billion). The organisations have settled bad debts of VND12 trillion (USD571.4 million) so far via this method.

In April this year, the SBV issued Decision 780 on restructuring enterprise debts. Under the decision, credit institutions are allowed to consider rescheduling repayment periods for borrowers who are unable to repay the principal sum or interest.

By late September this year, total rescheduled debts climbed to VND252 trillion (USD12 billion), accounting for roughly 8% of the banking system’s total outstanding loans of VND2,700 trillion (USD129.4 billion), from the figure of just VND36 trillion (USD1.7 billion) by June 30.

Out of the total outstanding loans of VND2,700 trillion, 73% are ensured by warranty assets.