Vietnam Aims to Cut Bad Debt Ratio to 3-4% by End-2015: PM

Vietnam will strive to curb bad debts of the banking industry at around 3-4% of total lending by the end of 2015, Prime Minister Nguyen Tan Dung told the country’s lawmakers early today [Nov 14].

Non-performing loans are estimated to have totaled VND250 trillion or 8.82% of total lending currently, 73% of which are backed by collaterals. Credit institutions have set aside VND75 trillion in loan loss provisions.

The government is currently directing the implementation of the following measures.

(1) Review and quantify total bad debts precisely; classify bad loans (according to business types, credit institutions and collaterals, etc.)

(2) Ask credit institutions to restructure their loans with appropriate methods and make full risk provisions to tackle non-performing loans. Lenders that fail to do so will have to use suitable sources, including charter capital to offset and be forced to lower credit growth to ensure safety.

(3) Require banks and borrowing firms to urgently handle collaterals to liquidate bad debts.

The government also asks the SBV to collaborate with the Ministry of Finance to develop the scheme to set up a debt trading company and issue legal documents as a basis for tackling bad debts.

Six out of nine ailing lenders have been restructured and these lenders’ operation became more stable now, the Prime Minister added.

Piling inventories, large bad debts amid sluggish demand are the ‘bottlenecks’ of the economy that need resolving immediately to create momentum for growth, Dung stressed.

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