Vietnam banks to restrain credit growth amid bad debt worries

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Many banks in Vietnam say dealing with bad debts rather than credit growth is going to be a priority task for 2012.

According to the Dau Tu (Investment) newspaper, even large banks in the country fear that bad debts could rise this year.

State-owned Bank for Investment and Development of Vietnam, for instance, has made collecting debts its top priority.

Ngo Van Dung, director at the Hanoi branch of the bank, said most of his clients are companies in the construction and transport sectors.

As state funding for transportation projects will be tightened this year, these clients may try to hold on to bank loans and delay repayment for as long as possible, Dung said.

Nguyen Thi Nga, chairwoman of SeABank, said the bad debt level at her bank usually stood at 1 percent of total loans. However, it reached 2.8 percent last year.

"Now we can't think of increasing lending because we only want to focus on debt collection. This is what other banks are going through too," she told Dau Tu.

The State Bank of Vietnam said in December it will stop applying a single credit growth target for all banks next year. Credit institutions will be divided into four groups and weaker banks will have to face greater credit growth restrictions, it said.

The central bank is aiming for an overall credit growth of between 15 percent and 17 percent this year.

Nguyen Thi An Binh, deputy general director at Military Bank, said the bank aims at a credit growth of 15 percent in 2012, compared to 20 percent in previous years.

After the central bank finishes categorizing banks and setting credit growth limits for them, the Military Bank may make necessary revisions to the target, she said.

"The 15 percent growth target has been set for branches with low bad debt levels only," Binh said. "Those with larger bad debts have to collect the debts first before they can disburse loans."

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