Vietnam’s banks are bracing for a new wave of debt recovery as Resolution No 42/2017/QH14 is codified into the amended Law on Credit Institutions, with analysts warning that the full benefits will only be visible from the second half of 2026.

Credit growth has accelerating since the beginning of June, signaling that the 15% growth target is achievable, if the rate is maintained in the remaining months of this year.

The settlement of bad debts will face many difficulties this year as there are no legal regulations related to repossessing collateral assets, industry insiders said.

High demand during the Tet shopping season has prompted commercial banks to introduce credit offers worth hundreds of billions VND for consumers, said industry experts and insiders.

The State Bank of Vietnam (SBV) has set a credit growth target of 15% for the domestic banking system in 2024.

Though the asset quality of banks in Vietnam will be temporarily under control until the end of 2023, experts said more attention should be paid to the issue in 2024 as bad debts are rising.

The bad debt ratio of the banking system skyrocketed from 2% at the beginning of this year to 3.56%, or more than VND440 trillion, at the end of July 2023, according to the latest data from the State Bank of Vietnam (SBV).

The banking sector should take more drastic measures to restructure credit institutions in association with the settlement of bad debts to contribute to curbing inflation and stabilising macro-economic factors, according to insiders.

Cash flow always looks to more attractive investment channels with higher returns, so when interest rates decrease, cash flow will shift from the savings channel to the stock and real estate markets, according to experts.

Having hold of a large amount of bad debts mortgaged by real estate, Vietnam’s four biggest State-owned banks are urgently recovering the debts, but the work remains tough for them due to the slowdown of the realty market.