Central bank targets lower bad debt ratio in 2013

According to him, risk provision funds set up by credit organisations in 2012 are expected to reduce bad debts by VND40-50 trillion. In addition, relevant agencies are considering the establishment of a national asset management company, which if approved, can deal with another VND100 trillion in bad debts.

The State Bank has submitted to the Government measures to deal with outstanding debts in capital construction, aiming to reduce the debt ratio by 30 percent each year until 2015, Binh said, adding that the central bank also plans to use other tools such as refinancing.

Besides measures to handle bad debts, the State bank will use refinancing to supply more money for production activities, with priority given to agriculture and rural development, small- and medium-sized enterprises, supporting industry and hi-tech companies.

Regarding other tasks next year, the central bank will continue efforts to restructure the banking system, while maintaining a stable foreign exchange rate and increasing the national foreign currency reserves.

The National Assembly has approved the target of 5.5 percent economic growth rate for 2013, and to achieve this goal, a very large amount of capital will be required.

Governor Binh said the central bank will try to ensure a credit growth of over 5 percent for each quarter and 5.5 percent for the whole year, adding that the growth, however, should be based on policies to maintain macroeconomic stability and control inflation. The task of the central bank is to keep a close watch of the situation and ensure the balance between the two growth targets.

The governor noted that the country has fulfilled the main targets of maintaining macro-economic stability and curbing inflation in 2012, to which the central bank had made positive contributions.

Although the economic growth rate and other macro-economic indicators were lower than the levels in other years, the 5 percent growth rate was acceptable in the context of the overall economic conditions. Besides, the balance of payments enjoyed a big surplus for the first time. The banking system has helped keep the foreign exchange rate stable throughout the year and raise the national foreign currency reserves to a record level.

The banking system also saw remarkable improvement in liquidity, maintaining its stability and assisting national economic development, Governor Binh said.

At the same time, he admitted that the restructuring of the banking system is slower than expectation. “However, this is a sensitive sector, requiring cautious and firm moves in order to ensure macro-economic stability while dealing with weak banks,” the State Bank governor affirmed.