The State Bank of Vietnam announced on Thursday that it will continue to tighten its control on the expansion of local banks, saying the restriction is an "effective" measure to overhaul the banking sector.
The central bank has chosen to retain its rules on the number of new branches that commercial lenders can open. The rules were introduced in 2013.
That means local banks continue to subject to a set of requirements in order to expand. Those with a bad debt ratio of 3 percent or posting losses in the previous year are not allowed to set up new branches.
The number of new branches in a year is also limited to three for banks with less than one year of operation, and five for older banks. Local banks are not allowed to have more than 10 branches in Hanoi or Ho Chi Minh City. Branches can run a number of smaller offices with a limited range of services.
A representative of the central bank told the Vietnam News Agency on Friday that banks caught offering interest to dollar depositors will also be punished with expansion restrictions.
In September last year, the central bank scrapped ceiling rates on dollar deposits to curb dollar hoarding, but some of local banks have reportedly been offering interest rates of 0.25-1 percent a year under the table, according to the news agency. They pay their customers in dong or in the form of gifts, it said.
Eximbank was the only one reporting losses, of VND817.47 billion ($36.09 million), last year. The bank is being monitored and if it cannot turn its situation around this year it will be delisted.
The banking system's bad debt was estimated at around 2.55 percent at the end of last year.
Local media said banks finished reporting their individual bad debt status to the central bank at the end of April.