Hanoi (VNS/VNA) - TheCOVID-19 pandemic is weighing on the banking system’s non-performing loans(NPLs), requiring significant efforts tokeep NPLs ratio below 3percent by the end of this year as targeted by the Government.

Tran Du Lich, a member of the NationalFinancial and Monetary PolicyAdvisory Council, said the increase in bad debts was unavoidable because of thepandemic. However, it was necessary to keep NPLs ratio at a reasonable level, Lich said, adding that bad debts wouldnegatively affect credit flow.

Accordingto the State Bank of Vietnam, thepandemic pushed up NPLs ratio. Statistics showed that on-balance sheet NPLsratio was estimated at 1.8 percent at the end of June.

Inthe scenario that the gross domestic product (GDP) expanded at four percentthis year, on-balance sheet NPLs ratio was forecast at 2.41 percent by the endof this year, 0.78 percentage point higher than the end of 2019. If GDPexpanded at five percent this year, the ratio of on-balance sheet NPLs would beat 2.16 percent, 0.5 percent higher.

Expertspredicted that the Government’s target of keeping bad debt ratio, includingon-balance sheet NPLs of credit institutions, bad debts sold to the Vietnam Asset Management Company (VAMC)and debts that had implemented debt classification measures, below three percentwould be challenging this year.

Accordingto Do Hoai Linh, Director of the Finance and BankingInstitute, the goal seemed impossible because COVID-19 was weighing on thesocio-economic development. Linh predicted the NPLs ratio would be around four percentthis year.

Can Van Luc from BIDV Training and Research Institutepredicted on-balance sheet NPLs ratio at four percent, more than twice higherthan the end of last year due to anticipated low credit growth and strugglingbusiness.

Luc said the total ratio of NPLs, includingon-balance sheet, sold to VAMC and debts classified, could amount up to six percentof the total outstanding loans, 1.5 times higher than the end of 2019.

Thecentral bank said that struggling business and production were affectingrevenues and asset quality of credit institutions.

Thebanking sector was on the way to keeping NPLs ratio below 3 percent by the end ofthis year but the pandemic posed a significant challenge.

Globaland domestic economic uncertainties, coupled with unpredicted development ofAfrican swine fever, natural disasters and diseases were also challenges incontrolling bad debts.

Asbad debts mainly stayed at weak credit institutions, the central bank saidfocus would be placed on restructuring these credit institutions following themarket mechanism and the principle of ensuring rights of depositors andmaintaining the system’s stability and safety.

On-balancesheet NPLs ratio has been kept at below three percent during the past fouryears, specifically 2.46 percent in 2016, 1.99 percent in 2017, 1.91 percent in2018 and 1.63 percent in 2019./.