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Irrecoverable debts cause headaches to bankers
Finance experts have warned that the non-performing ratio (NPL) will be high by the end of the year, when businesses get exhausted with the high-interest rate loans. The current economic challenges make it difficult for businesses to pay bank debts on schedule.
The NPL picture has become clearer recently when banks begin collecting debts to reduce the non-production loan percentage to 20 percent as requested by the State Bank. Bankers said that the irrecoverable debts incurred by some businesses have reached tens to hundreds of billions of dong.
Irrecoverable debts cause headaches to bankers
Managers of commercial banks declined to reveal the figures about NPL, but they have expressed their worries about the bad debts which may become irrecoverable. Director of a bank branch on Cong Hoa Road in Tan Binh district of HCM City said that besides the new debts, the bank still cannot collect the debts which businesses have incurred for the last few years.
Finance experts have warned that the NPL picture will show up more clearly in late second quarter of at the beginning of the third quarter, when the efforts to pay debts make businesses exhausted.
Managers of banks said that the NPL ratio tends to increase not because borrowers deliberately delay the debt payment, because their business has been bad, which makes them unable to pay debts.
Dat Viet has quoted its sources as saying that many banks have the NPL ratios as high as 2-2.5 percent of total outstanding loans. Though banks are taking drastic measures to take back loans, finance experts still have warned that the NPL ratio will continue rising towards the end of the year. The total NPL of banks has reportedly reached 100 trillion dong.
Dr Vo Tri Thanh, a well-known economist in Vietnam, said on Tamnhin that NPL is not a new story in Vietnam. The NPL ratio reached 13 percent in late 1990s. At that time, Vietnam had to run a special banking system reform, putting some banks under special supervision and run the program on reforming state owned enterprises.
The NPL ratio had reached 2.5 percent by the end of 2010, in accordance with Vietnamese way of calculation. If counting on the outstanding loans that banks gave to the Vietnam Shipbuilding Industry Group Vinashion, the NPL would be 3.2 percent.
Meanwhile, some experts believe that if calculating NPL in accordance with the international standards, the actual NPL ratio would be triple the released figure.
The NPL increase is believed inevitable, because it is very difficult to do business in such current conditions, with tightened monetary policies, lower public investments and higher input costs.
According to the State Bank, the NPL ratio of the banking system stays at 3 percent, while it hopes the figure would be less than five percent by the end of the year.
What to do?
Dr Le Tham Duong from the HCM City Banking University said on Dat Viet that the NPL ratio in Vietnam is still within the control (2.7 percent of GDP). In principle, NPL will have bad impacts on the national economy if the ratio is at above five percent.
Economists say they do not think the NPL ratio would decrease towards the end of the year. The current economic difficulties make it difficult for businesses to sell products, while they have to pay the sky high lending interest rates of 25 percent on average.
However, Duong does not keep pessimistic about the bad debt. People now have to struggle to live on the escalating goods prices, while businesses have to struggle to survive the difficulties, and banks also have to face difficulties. It is now the right time to “filter” businesses, including banks, and only strong businesses can survive and develop.
vietnamnet
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