With this ratio, the total amount of bad debt in the banking system was VND440 trillion by the end of July this year.

The amount includes that of the five banks which are under special control by the SBV: SCB, DongA Bank, CBBank, OceanBank and GPBank. If these five banks are not taken into account, the ratio of bad debt still on the balance sheets of commercial banks nationwide would be 1.92%.

When taking into account the debts sold to the Vietnam Asset Management Company (VAMC) that have yet to be settled and the potential liabilities of credit institutions, the total bad debt would amount to VND768 trillion, which is equivalent to 6.16% of all outstanding loans, showed data of the SBV, the central bank.

In early 2019, the Government set a target to lower the ratio of bad debt remaining on the balance sheets of banks to below 2%. Accordingly, this ratio was recorded at below 1.69% in late 2020 but rose to 2% in late 2022. The Covid-19 pandemic and global and local economic woes have caused bad debt to rise for four consecutive years.

Seven listed banks had seen bad debt exceeding 3% of their outstanding loans by the end of June this year, including NCB, ABBank, BVBank, VPBank, VietBank, OCB and PGBank. If these banks fail to reduce their bad debt ratios to below 3%, they could face business restrictions in accordance with SBV regulations.

Bank leaders predicted that bad debt would likely reach record highs by the end of the third quarter this year, but a downward trend would begin in early 2024.

Currently, rising overdue debt, coupled with the frozen real estate market, have made life hard for banks to manage non-performing loans.

Source: Saigon Times