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SBV to bring non-performing loans below 3% by 2020

Update: April, 06/2017 - 09:39
Bad debt ratio will be kept at below 3 per cent by 2020. - vneconomy.vn
Viet Nam News

HÀ NỘI — The State Bank of Việt Nam plans to reduce the ratio of non-performing loans (NPLs) at commercial banks and the Việt Nam Asset Management Company (VAMC) to below 3 per cent by 2020 under an action plan to implement a Government resolution.

The government resolution speaks of renovating the growth model and economic restructuring in the 2016-20 period.

The central bank’s policies would target the stabilising of the macro-economy and controlling inflation at below 5 per cent.

Accordingly, NPLs at credit institutions would be reduced to below 3 per cent. This would include bad debts sold to the VAMC but not include those of poorly-performing banks for which the Government approved handling measures separately.

Previously, at a first draft version of the law on supporting credit institution restructuring and handling NPLs, the central bank mentioned the unexpected high bad debt ratio, which surprised the market.

The draft said that the NPL ratio could amount to 8.86 per cent, including bad debts managed by VAMC and debts which potentially turned into non-performing due to a shortage of mechanisms in handling bad debts and mortgaged assets.

With the outstanding loans totalling VNĐ5.5 quadrillion (US$241 billion) as of the end of 2016, bad debts could amount to VNĐ487 trillion.

The central bank also planned to reduce lending interest rates to ensure the competitiveness with average lending rates in ASEAN-4 (Indonesia, Malaysia, Philippines, and Thailand).

At the Government’s meeting early this week, Prime Minister Nguyễn Xuân Phúc said that if interest rates were not lowered, rates could not be raised, and adding a one-per cent cut in rates could help save VNĐ55 trillion in financial costs. — VNS

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