Vietnamese banks have been struggling to reduce their bad debts, but it is their customers who are paying the price for this costly cleanup, an expert said.
Banks have to set aside large provisions and they pass on the costs to customers, expanding the margin between lending and borrowing rates, Nguyen Tu Anh, a researcher from the Central Institute of Economic Management, said at a conference on Thursday.
"Depositors are offered low interest rates on their savings while borrowers have to pay more for loans," he said.
Vietnam has been asking banks to sell bad debts to the central bank's asset management company VAMC. But banks are required to have a reserve equal to 20 percent of the amount of bad debt sold.
Anh said the public will keep being the victims if the country does not find a more effective way to tackle bad debts.
The State Bank of Vietnam plans to reduce bad debt in the system to 3 percent of all loans by the end of the year.
The ratio has increased to 3.59 percent in the first two months this year from 3.25 percent last December.