Bad debts rise to 2.72 percent in Vietnam

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Non-performing loans in Vietnam's financial system have expanded to 2.72 percent of total loans, up 0.55 percent from the end of last year, the central bank said.

It added, however, said that the increase was not a cause for alarm.

Deputy Governor Nguyen Van Binh said earlier this month that total non-performing loans are unlikely to expand by more than 5 percent this year, which is a safe level.

Loans are considered safe when interest payments and principal can be collected on time. These safe loans now account for 92 percent of total credit in the country, a central bank source said. Of the remaining 8 percent, more are getting closer to being in default.

An official at a commercial bank, who wished to be unnamed, said the 92 percent ratio of safe loans was quite low, showing that local banks were facing more risks now.

As credit has been tightened and banks have cut back on lending, many companies have extended payments beyond due date on purpose, he said.

They accepted late payment fines just to hold on to the loans for as long as they can, fearing that they would not be able to apply for another loan, he explained.

Statistics provided by a banking source showed that only 30 out of 100 credit institutions had a perfectly safe loan portfolio at the end of May. Most of them were foreign banks, which means the majority of non-performing and underperforming loans are with Vietnamese commercial banks.

As of June 10, dollar loans had jumped 22.21 percent from the end of 2010, while loans in dong rose only 2.72 percent, the central bank said in a report Thursday.

The central bank has, once again, ordered local banks cut loans for non-manufacturing purposes to 22 percent of their total loans by June 30.

Some banks may fail to meet the deadline and will have to face penalties, State Bank of Vietnam Governor Nguyen Van Giau said last week.

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