Non-performing loans are not only a legacy issue but a growing risk for the future

Amid rapid credit growth, liquidity pressures, and continued difficulties for enterprises, analysts say a coordinated approach is needed to resolve bad debts. Without such measures, non-performing loans (NPLs) could reemerge in a new cycle, placing heavy pressure on the banking system and the economy.

On April 15, at the headquarters of the Vietnam Asset Management Company (VAMC), the Vietnam Banks Association, in cooperation with related agencies, hosted a seminar titled “Bad Debts in a New Context.”

Current NPL levels and the need for mobilization

Speaker Nguyen Quoc Hung, Deputy Chairman and General Secretary of the Vietnam Banks Association, cited preliminary data indicating on-balance-sheet NPLs and latent NPLs stand at roughly 2.8%. He said that if this resource were mobilized and deployed in productive activity, the economic gains would be substantial, including reduced costs for credit institutions, the return of capital to circulation, support for business development, and a boost to growth.

Dang Dinh Thich, Acting General Director of VAMC, said that given current conditions, without decisive solutions and positive support from authorities, banks alone cannot resolve the problem. He warned that it could become a heavy burden on the banking system, raising borrowing costs for businesses and clogging capital flows, thereby hindering growth.

Structural challenges in bad-debt resolution

Can Van Luc, Chief Economist at BIDV and a member of the National Financial and Monetary Policy Advisory Council, said Vietnam’s lending and bad debt resolution face several structural challenges compared with international norms. These include creditor rights not being adequately protected, a tendency to favor borrowers, and a resolution process that can take years or decades due to a still-nascent debt trading market.

Scale of bad debts and liquidity pressure

With total outstanding credit around 19 million trillion dong, even a 2% NPL ratio implies about 380 trillion dong in bad debts. Factoring in latent NPLs, the figure is even larger.

Experts also highlighted that credit growth has outpaced mobilization and deposit growth, elevating liquidity pressure since late 2025. “Without timely and adequate solutions, this pressure could translate into risks to system safety,” Prof. Can Van Luc warned.

Outlook for 2026 and policy direction

During the seminar, experts concurred that 2026 will be a watershed year for the country’s banking sector. They said quickly and decisively resolving bad debts would improve capital adequacy and profitability, and open room for credit growth in the new cycle. A key driver is the reform mechanism under discussion.