HCMC – The Government has proposed the National Assembly allow extending the validity of Resolution 42 on bad debt settlement until 2023, it was announced at the 15th National Assembly’s third session on May 24.
The resolution, which is set to expire in August, has been helping banks handle bad debts faster. For example, local banks are permitted to keep collateral for loans if they fail to recover bad debts.
On behalf of the prime minister, Governor of the State Bank of Vietnam Nguyen Thi Hong made the proposal at the third session as the Covid pandemic had made life challenging for borrowers to pay debts, leading to a surge in bad debts in the banking system.
If the resolution is not extended, it will cause disputes over bad debt settlements between banks and borrowers. According to Governor Hong, an increase in bad debts that is not dealt with quickly will discourage local and foreign investors from joining debt settlements and restructuring credit institutions.
After nearly five years of the resolution being in force, VND380.2 trillion of bad debt, equivalent to some 48% of the total, was handled from 2017 to 2021, with 40% paid by customers. Proceeds from the sale and liquidation of collateral amounted to VND77.2 trillion.
Every month, some VND5.67 trillion of bad debt was settled on average during the implementation of Resolution 42, double the figure seen before the resolution took effect.
All policies over bad debt settlement should be maintained, especially amid the ongoing Covid pandemic in the world, said Vu Hong Thanh, head of the NA Economic Committee.
The National Assembly will decide on the Government’s proposal on May 25, the local media reported.