Vietnamese banks resolve 60% of bad debts

by 12 October 2015 Last updated at 15:14 PM

VTV.vn - The Vietnamese banking sector’s bad debts fell below 3% as of September, meeting the sector’s annual target ahead of schedule.

Điện Biên Cement Company invested nearly 35.8 million USD in expanding production in 2012. However, due to economic crisis at that time, the investment did not pay off and the company’s loan from Agribank was classified as bad debt. Without sufficient capital, the company could not maintain its business and was about to sell its facilities to pay debts. However, the company’s debts were then restructured based on the State Bank of Vietnam’s Decision 780.

Nguyen Van Thinh Director, Dien Bien Cement Company said: The bank was a saviour for use. They helped us restructure our debts so that we could develop our production. So far, we’re well on course to complete our debt repayment schedule.

If businesses resolve their debts, there could be a sustainable way to resolve outstanding bead debts. Bearing this in mind, Agribank has focused on resolving non-performing loans. So far, Agribank has resolved its bad debts well ahead of schedule.

Tiet Van Thanh, General Director, Agribank added: The bank’s board and management have implemented strict measures. We’ve gathered 74 experienced leaders from our branches to establish a bad debt resolution committee. Our bad debt rate currently stands at 2.51%.

Similar to Agribank, other commercial banks also applied several solutions to resolve and reclaim non-performing loans. As of August, the whole banking system had resolved 91.2% of total bad debts.

Pham Huyen Anh, Deputy Chief Inspector, State Bank of Vietnam said: Our financial institutions have resolved 59% of their bad debts themselves. As of late August, the rate of bad debts stood at 3.21%.

Resolving bad debts will help lower interest rates and boost credit growth. However, these efforts mean banks will have to tighten spending, cut salaries for their staff and lower profit targets.

"The profits of the whole banking system have decreased for the last 3-4 years. The proportion of profit to capital is just above 5%." said Can Van Luc, Banking expert

Overcoming difficulties to lower the rate of bad debts is a painstaking process for each bank. However, by resolving non-performing loans, commercial banks in Vietnam will improve their operational standards.

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