HA NOI (Biz Hub) — The Viet Nam Asset Management Company (VAMC) may fall well short of its target to remove VND70 trillion ($3.3 billion) worth of non-performing loans from the nation's banking sector this year.

The statement was made by State Bank of Viet Nam (SBV) Governor Nguyen Van Binh after announcing that VND30 trillion (US$1.4 billion) of bad debts will be addressed in 2013.

VAMC cannot reach its target to solve VND70 trillion of bad debts this year. Photo vtv.vn

Binh said the VAMC had revised the target due to operations beginning two months later than expected, but expressed that greater progress would be made on improving bank asset quality and profits in 2013.

The SBV Governor also said there were signs credit institutions were ramping up their own efforts to remove bad debts, rather than relying solely on VAMC support.

A report released by credit institutions in Viet Nam showed the proportion of non-performing debt, calculated until June this year, had fallen to 4.46 per cent.

Binh said the SBV had prepared four circulars instructing banks and credit institutions to sell their bad debts to the VAMC.

The SBV sought approval from the Prime Minister to offer lower interest rates to banks who want to refinance capital through special bonds. The bank is hoping to restructure non-performing loans in the financial system by providing easy access to credit through five year, zero per cent interest bonds.

The move aims to help banks increase access to credit and achieve a 12 per cent credit growth target.

The VAMC was established by the SBV and commenced operations on July 26 .— VNS