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Bad debts rise due to Covid-19: SBV governor

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HCMC – The bad debt ratio will rise by 4% at the end of the second quarter of 2020 and 3.7% at the end of 2020 if the coronavirus pandemic is brought under control in the second quarter, according to Le Minh Hung, governor of the State Bank of Vietnam (SBV).

Speaking at an online meeting between Prime Minister Nguyen Xuan Phuc and localities on April 10, Hung stated, “The bad debt ratio will rise even further, affecting the restructuring of banks and the recovery capacity of weak banks.”

Some VND2 quadrillion, which accounts for 23% of the outstanding credit balance, is facing the risk of being turned bad debts. The most affected sectors include the manufacturing and processing industry with VND520 trillion; agriculture, forestry and fishery with VND157 trillion; and the mining industry with VND45 trillion.

The exchange rates were kept at 1.2%-1.5% in the first three months of 2020. SBV has used tools such as liquidity regulation to stabilize the exchange rates.

Hung remarked that the country’s current foreign exchange reserves amount to US$84 billion, increasing by US$4 billion compared with the end of 2019, and SBV will sell foreign currencies to stabilize the market and macroeconomics when needed.

Foreign exchange reserves increased and exchange rates were kept stable, but the outstanding credit saw modest growth. As of the end of March, the outstanding credit reached over VND8.3 quadrillion, up 1.3% compared with late 2019.

Banks have cut interest rates by 2-2.5 percentage points, but demand for loans among businesses remains low. However, SBV forecast credit growth in 2020 would reach 11%-14%. “We will ensure banks are able to provide enough capital for the economy under any circumstances,” Hung said.

SBV has asked banks to provide loans at low interest rates and to cut their operating costs so they can lower interest rates.

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