The State Bank of Vietnam (SBV) at a review conference on Wednesday said that strong measures will be continued to tackle bad debts in 2013 while deposit rate cap may be removed given the improved liquidity in banks.

According to a report released after the conference, bad debt grew 2% monthly in the final half of 2012 compared to a monthly 8% in the first half. The success was due to credit institutions having applied solutions to curb new bad debts, collect overdue debts and handle existing bad debts.

As of the end of November, risk provisions amounted to VND78.6 trillion, or 58.3% of bad debts and up 33% compared to the end of 2011. Bad debts tackled by banks totaled VND45 trillion (USD2 billion).

Many banks last year reduced profits, cut expenditures and even employee wages to deduct for the risk provision funds to handle bad debts.

To basically handle bad debts, the central bank has submitted to the Government two projects for tackling bad debts and setting up an asset management company. SBV also has plans to realize the two projects within 2013 and build up organization and operation rules to launch the asset management firm into operation.

Concerning management of monetary policies in 2013, SBV will adjust interest rates following developments of the macro economy, the monetary market and inflation. Dong deposit rate ceiling will be maintained to stabilize the market but SBV will consider removing this cap if liquidity of the banking system really improves.

If inflation in 2013 goes down compared to 2012, the central bank will continue slashing interest rates, the report said.

Meanwhile, credit growth in 2013 will be curbed at 12% but be adjusted flexibly in line with the reality. The central bank will not control lending ratios in sectors that are not encouraged.

The nation’s credit growth was put at 8.91% as of the end of 2012. Of which, dong credit growth reached 11.51% while that in foreign currencies dropped 1.56% against the end of 2011.

The central bank will also combine with the Ministry of Construction to give guidelines for budget home purchase to ease difficulties of the real estate market.

Besides, after defining nine commercial banks seen as ailing ones, the central bank has had international audit firms audit and inspect these lenders.

SBV has told these banks to build up restructuring schemes in accordance with the law and the credit institution restructuring plan in the 2011-2015 period to fix problems and shortcomings of each bank.

The central bank has sought suggestions from the Government for schemes restructuring eight out of nine weak banks. Accordingly, three of these banks have been merged into one and another bank has been merged with another one.