Vietnam 2011 bad debt could rise to 5 pct of loans

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Bad debt in Vietnam's banking system could rise to 5 percent of total loans by the end of this year under a worst-case scenario, a state-run newspaper on Wednesday quoted a central banker as saying.

That level would be nearly double the ratio seen in mid-June.

Deputy Governor Nguyen Van Binh gave the projection in a story in the Vietnam Economic Times newspaper.

Non-performing loans as of June 10 rose to 2.72 percent of outstanding loans from 2.17 percent at the end of 2010, state-run media quoted central bank governor Nguyen Van Giau as saying late last month.

Vietnamese businesses have been facing high interest rates and higher input costs, which could force delays in many projects, the National Assembly's Economic Committee said in a report last week.

Giau now heads that committee, following a vote by the parliament last weekend.

Banks have been charging between 18-20 percent for medium- and long-term dong loans, making it difficult for businesses to operate, business executives said.

"Production and business, if facing delays for a prolonged period, could lead to the risk of raising bad debts in banks in the last months of 2011 and in 2012," the parliament report said.

Exporters of coffee and rice, Vietnam's top agricultural cash earners, have been reluctant to take loans to stockpile the commodities even as demand is projected to rise, traders said.

Rice traders said the Vietnam Food Association postponed a plan to stockpile 1 million tons of milled rice from the summer-autumn crop partly because member companies have said they could not afford to make high interest payments on loans.

Initially they had scheduled to start buying paddy from July 15 and keep the grain off the market for three months to support prices at the harvest peak.

The Vietnamese government plans to keep the annual credit growth of the banking sector below 20 percent this year, following a rise of 27.65 percent in 2010.

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