Vietnam’s bad debt ratio surges to 6.9% as Covid casts shadow: SBV

Non-performing loans (NPLs) have been rising in Vietnam’s banking system, currently accounting for 6.9% of total lending, a central bank official says.

The NPLs include on-balance-sheet debt, debt sold to the central bank-run Vietnam Asset Management Company (VAMC), and rescheduled loans that are potentially convertible into bad debt, State Bank of Vietnam (SBV) Deputy Governor Dao Minh Tu said at a Tuesday press meet.

On-balance-sheet sour loans now account for around 5% of total lending, he added.

The official attributed the rise in bad debt to economic hardships derived from the Covid-19 pandemic.

He noted that under Project 689, the government aims to bring down the bad debt ratio to below 3% by the end of 2025. To meet this target, the SBV has requested banks to handle toxic loans aggressively.

SBV data shows that on-balance-sheet bad debt ratio stood at 4.55% as of end-2023, more than double the 2.03% at end-2022.

Tu said credit growth has been accelerating, rising by more than 6% over end-2023 as of June 28.

Meanwhile, the Vietnamese dong has depreciated circa 4.4% versus the U.S. dollar so far this year, lower than that of many regional currencies, he noted.