Though the total bad debt of the local banking system has risen to 8.8-10 percent from 3.05 percent of total outstanding loans at the end of 2011, the growth has slowed since June, said the central bank.

According to the financial reports of commercial banks, as of September 30, their non-performing loan (NPL) ratios have gradually increased over the past nine months.

Most local banks saw their bad debt ratios double compared to the end of last year.

The sharpest NPL increases are found at Vietcombank (from 2 percent to 3.21 percent), ACB (from 0.9 percent to 2.1 percent), Sacombank (from 0.57 percent to 1.4 percent), BaoVietBank (from 4.56 percent to 6.13 percent), and Navibank (from 2.92 percent to 3.97 percent).

On the other hand, some banks witnessed slower NPL growth during the period, including Techcombank (from 2.82 percent to 2.94 percent) and KienlongBank (from 2.77 percent to 2.78 percent). PGBank actually reduced its bad debt from 3.06 percent last year to 2.96 percent.

The most notable features in the overall NPL pictures of local banks is the NPLs in group 5, considered irrecoverable, which require banks to deduct 100 percent of the NPL value soured from its available capitals as loan loss provisioning .

According to those financial reports, the largest NPLs in the category were found at BaoVietBank with 2.93 percent, followed by LienVietPostBank (1.46 percent), Vietcombank (1.42 percent), BIDV (1.22 percent), Military Bank (1.07 percent), and KienLongBank (1.36 percent).

Potentially irrecoverable debt at other banks also stood at approximately 1 percent of outstanding loans, including VietinBank (0.86 percent), Techcombank (0.99 percent), ACB (0.81 percent), and PGBank (0.83 percent).

However, regarding absolute NPL data, the biggest bad debt in group No.5 was recorded at BIDV with VND3.98 trillion, followed by Vietcombank (over VND3.2 trillion), Vietinbank (VND2.58 trillion), ACB (VND 829.1 billion), Military Bank (VND629.4 billion), and Techcombank (VND610.8 billion). (VND1 trillion = $48 million)

As a result, compared with the end of 2011, potentially irrecoverable bank debt has surged, except at KienlongBank, where it fell nearly 4 percent.

LienVietPostBank and BaoVietBank saw their potentially irrecoverable loans increase by 53 times and 6 times compared to 2011, from VND4.48 billion to VND243.8 billion, and from VND23.5 billion to VND170 billion, respectively.

Some also saw strong growth in potentially irrecoverable NPL, including Techcombank (170 percent times), ACB (180 percent), Sacombank (150 percent), Vietinbank (182 percent), Vietcombank (41 percent), Military Bank (33.5 percent), and Navibank (79 percent)

However, the prospect of potentially irrecoverable debt will increase slowly in the last quarter of this year, as banks have begun to recall their debts by applying more professional solutions like debt rescheduling.

Nguyen Van Binh, the State Bank of Vietnam (SBV) Governor, recently said the institution has completed plans for dealing with bad debt that will be submitted to the government before November 15. The plan is expected to reduce the NPL rate to 3 percent in 2015.

The central bank has launched a comprehensive inspection at 32 local credit institutions.

Those inspections have found that though many joint-stock commercial banks had reported profitable operations, in fact they have incurred heavy losses that have eaten into their capital. Some have even lost all of their capital, Binh said.

Certain banks such as Navibank, Tien Phong Bank, Trust Bank, Western Bank, Global Petroleum Bank and Hanoi Housing Bank (HHB) need to be reorganized or consolidated. HBB in August was merged into Saigon-Hanoi Commercial Joint Stock Bank.