Credit had expanded by 9.09% as of August 23 compared to end-2015, but settling bad debt remains an uphill battle for lenders, according to a State Bank of Vietnam (SBV) report on banking operations in January-August.
Loan growth in the first eight months of the year was higher than in the same period last year, buoyed by increased lending to the manufacturing and priority sectors to fuel economic growth.
The agricultural and rural development sector had seen outstanding loans from lenders, excluding the Vietnam Bank for Social Policies and Vietnam Development Bank, amounting to VND900 trillion (US$40.3 billion) by the end of August. The sum is 6.64% higher than in end-2015 and represents 18% of the total.
Lending to the real estate and high-risk sectors was monitored but this did not affect bank loans for social housing projects.
According to the SBV, interest rates remained stable. Since the end of April, banks majority owned by the State have cut short-term rates by 0.5 percentage point and adjust medium- and long-term rates to a maximum of 10% per annum.
At present, annual rates of 6-9% are applied to short-term credit and 9-11% to medium- and long-term one.
The bad debt ratio had stood at 2.58% as of June 30, shrinking from 2.78% a month earlier. The central bank report does not provide updates about bad debt by end-August.
Vietnam Asset Management Company (VAMC) and credit institutions have encountered a slew of challenges in the process of dealing with bad debt over the past time. Regulations on the handling of mortgaged assets are inadequate, making it hard to settle bad debt. Legal proceedings against bad debtors are time-consuming, another challenge for settlement of bad debt.
The central bank said in the report that it has petitioned the Prime Minister to order relevant ministries and agencies to remove difficulties to VAMC but it will take time to review and adjust legal documents.
Besides, mortgaged assets registered by debtors are mainly properties but the real estate market has yet to fully recover, which negatively affects the bad debt handling process.
As for losses caused by April’s mass fish deaths in the central coastal provinces of Ha Tinh, Quang Binh, Quang Tri and Thua Thien-Hue, branches of the central bank said nearly 8,900 clients who borrowed a total of VND2.18 trillion from banks have been impacted by the serious environmental incident.
There is no criteria for determining losses of fishermen, businesses, restaurants, hotels and travel agencies.
As of mid-August, banks had given VND299.29 billion to 3,738 customers in the localities to help them cope with the aftermath of the severe environmental incident triggered by harmful industrial waste discharged by the Formosa steel complex in Ha Tinh Province.
Some VND103.07 billion of bank loans taken out by 1,255 customers are kept in the same groups. Meanwhile, lenders cut or exempt interest rates for VND923.67-billion loans of 633 customers, and plan to freeze debt totaling VND891 million owed by 44 customers.
Banks offered preferential loans worth a combined VND208.93 billion to support people and businesses to buy 7,302 tons of seafood.
Photo: CBR Investment AG