Bad debt in Vietnam reached 6.9 percent in the first half of this year, according to the State Bank’s Deputy Governor Dao Minh Tu. This coincides with stronger credit growth this year than last but may suggest these new loans are not of the highest quality.
Of note, pursuant to amendments to Circular 39 made in June, loan applications for less than VND 100 million or about US$4,000 no longer need to detail a plan for the borrowed funds. Also back in November and December of last year, to meet annual credit growth targets, Vietnam’s banks embarked on some pretty aggressive lending campaigns that saw credit growth jump considerably but in what looked like mostly consumer loans. It could be that some of these loans are now turning bad.