The central bank has recently said

The central bank has recently said some firms, including infrastructure construction
ones, could not access loans due to their weak financial capacity, failure to demonstrate their projects’ feasibility and effectiveness, massive bad debts, and shortages of assets to mortgage at banks.
“Loosening requirements to borrowers to help firms easier access loans will cause credit risks, increase bad debts that will affect banking system security,” said the central bank.
Companies’ dreams of loosened credit requirements will not be met, said Kiem.
Finding it hard to increase loans to enterprises, many banks have sought ways to lure more individual customers to meet their credit growth targets.
Bank staff frequently come to visit, or call potential customers to promote their banks’ loans. Individual customers could receive gifts and preferential interest rates when borrowing at many banks.
General director of Oriental Bank Nguyen Dinh Tung said credit flows are unlikely to sharply increase in the short coming time. “Capital demand can increase only when production and consumption are spurred.”
What’s in a number?
Nguyen Duc Thanh, head of the Vietnam Center for Economic and Policy Research, said: “Credit growth does not depend on the banking’s system’s efforts only. Credit flows could be improved when we have a better business environment, facilitating firms’ development, and bad debts are solved.”
Economist Vu Dinh Anh said what’s most important is not credit growth, but credit quality. “We must not let new bad debts occur. If banks lower lending requirements, bad debts may increase in the next 3-6 months. ”
Economist Vo Tri Thanh said credit growth depends on bad debt reduction, banking system reform and financial policy. Vietnam targets credit growth of 12-14 percent this year.
However, bad debts now still stand high, hindering banks’ credit growth, said economist Nguyen Tri Hieu.
The World Bank has recently said credit activity in Vietnam remains subdued because banks, with balance sheets saddled by high levels of nonperforming loans, are increasingly risk averse and looking to deleverage.
“Credit demand also remains weak, reflecting low business confidence in the private sector. Important financial sector vulnerabilities remain, creating a drag on overall economic performance. Nonperforming loans in the banking sector continue to be a major concern, although poor quality data and limited disclosure requirements preclude accurate estimations of their magnitude,” it said.
In an effort to deal with nonperforming loans in the banking sector, the government has established the Vietnam Asset Management Company (VAMC), which is responsible for the purchase, recovery, and restructuring of banks’ bad debt. However, there are concerns over the operational capacity of the VAMC, the lack of resources to meet banking sector capitalization needs, and the pace of implementation, among other issues.
The issues of bankruptcy, insolvency, and creditor rights will also need to be addressed to facilitate corporate debt restructuring, according to the World Bank.
Bad debt in Vietnam is expected to account for about 9 percent of total loans, after careful calculations, below the 15 percent ratio estimated by Moody's Investors Service, the central bank said in a recent statement.
Banks in Vietnam managed to cut bad debt to 3.63 percent of loans at the end of 2013, from 4.73 percent last October, said the central bank after a Moody's report on February 18.