Bad debt in Vietnam a big concern: gov't official

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Bad debt in Vietnam, especially that owed by inefficient state-run groups, is a big concern and could pose a risk to economic stability in coming months as banks have not come up with plans to clean up their books, a government official said on Tuesday.

"Bad debt in the banking sector is a major concern," Le Xuan Nghia, deputy head of the National Financial Supervisory Committee, told a workshop chaired by the World Bank in Hanoi.

"State-owned economic groups are performing very inefficiently. They have used a large part of the national capital and are accumulating bad debts for banks," said Nghia, a former central bank official.

"Commercial banks have yet to find solutions to improve the situation," he said, without giving any value for the debt. "It's a secret," he added.

Non-performing loans as at June 10 rose to 2.72 percent of outstanding loans from 2.17 percent at the end of 2010, central bank Governor Nguyen Van Giau told Thanh Nien newspaper last Friday as saying.

High interest rates charged by banks have a negative impact on business and bad debt, Nguyen Ngoc Bao, head of the central bank's monetary policy department, told the conference.

Banks are charging as much as 20 percent for medium- and long-term dong loans.

Last month the central bank said outstanding loans at the end of 2010 totaled $125 billion, or nearly 20 percent more than gross domestic product.

Credit as of June 10 had risen 7.05 percent from the end of 2010, the central bank has said.

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