The State Bank of Vietnam said in a statement that 84 percent of non-performing loans were mortgage-based and the value of the mortgages was equivalent to 135 percent of the bad debts.

Lenders had made provisions worth 67 trillion dong (3.2 billion) by the end of May to deal with the bad debts, the statement said.

Last month, state media reported non-performing loans rose to 4.14 percent of total lending to 108.6 trillion dong ($5.18 billion) as of April as economic difficulties prevented businesses from settling debts and getting new loans.

Governor Nguyen Van Binh had been previously reported as saying non-performing loans had risen to 10 percent from 6 percent of total loans, without giving a timeframe for the figure.

Non-performing loans stood at 3.07 percent at the end of last year, the central bank said.

In the banking system reform plan published in March, the State Bank of Vietnam said it would resolve non-performing loans by selling mortgaged bad debts to the Finance Ministry's Debt and Asset Trading Co and allowing banks to turn their loans into the stakes in borrowers' firms.

The government will consider buying property projects which were used as the mortgages for loans and use them for social welfare purposes and state agencies' use, the plan said.

The central bank also aims to establish a national asset management firm to speed up resolving bad debts, state media has reported.

The total loans in the banking system rose 0.76 percent in June from the end of last year while the money supply was up 5.57 percent versus the government's estimate of 6.84 percent, the statement said.

Vietnam's economy slowed to a 4.38 percent growth in the first half this year from 5.57 percent in the same period last year. Businesses had high inventories and were reluctant to borrow while lending rates were high, leading to a negative credit growth in the first four months this year.

In late May, the government shifted its priorities to stimulating expansion and Prime Minister Nguyen Tan Dung told banks with surplus funds to boost lending, after the inflation rate fell to below 10 percent for the first time since October 2010.

The central bank said it plans to bring the credit growth to 8-10 percent in the second half of the year.

The total deposits in the banking system rose an estimated 6.49 percent in the first half of the year, the central bank said.

It has completed the plans to restructure two ailing lenders and will build the consolidation schemes for four remaining weak banks, the statement said, without naming the banks.