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Central bank firm on bad-debt resolution
The Saigon Times Daily
Monday,  Jul 24, 2017,22:14 (GMT+7)

Central bank firm on bad-debt resolution

The Saigon Times Daily

Staffers of a commercial bank in HCMC handle stacks of Vietnamese dong banknotes. The State Bank of Vietnam (SBV) is working hard towards settling bad debts by 2020 - PHOTO: TL

HCMC – The State Bank of Vietnam (SBV) is working hard towards settling bad debts and restructuring the banking system by 2020, Nguoi Lao Dong newspaper reports.

The SBV last Friday held a teleconference on the National Assembly’s Resolution No. 42/2017/QH14 on settlement of non-performing loans (NPLs) on a trial basis, and the Prime Minister’s decision on the restructuring of credit institutions in 2016-2020.

Resolution No. 42 is aimed at removing legal barriers to banks’ settlement of bad debts and assets used as collateral for loans by creating a synchronous and effective mechanism for the prompt handling of bad debts, said SBV governor Le Minh Hung.

According to the central bank, the bad debts sold to the Vietnam Asset Management Company (VAMC) accounted for a mere 5.81% of total outstanding loans as of late last year. If the debts which have been restructured are taken into account, NPLs would make up 10.08% of the total.

The central bank’s target is to bring down the ratio of NPLs, including those sold to VAMC and being classified, to less than 3% of total outstanding loans by 2020, excluding bad debts of loss-making commercial banks.

Trinh Ngoc Khanh, board chairman of the Vietnam Bank for Agriculture and Rural Development (Agribank), said at the teleconference that his bank would write off the penalties on those failing to pay interest on time, and adjust down interest rates for all NPLs prior to August 15.

Agribank is expected to reduce overdue interest payments by around VND30 trillion for those debts settled by the bank or sold to VAMC. It plans interest rate reductions, even by 100%, to encourage its debtors to pay debts. If its debtors respond positively to this plan, the bank could collect about VND40 trillion, said Khanh.

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