The draft resolution on irrecoverable debt relief by credit institutions was discussed during the National Assembly’s (NA) third session yesterday, and NA members remained in favour of the draft after adding several improvements.

Customers make transactions at Vietnam Prosperity Joint Stock Bank’s main office in Ha Noi. 

Going through draft resolution’s 18 articles regarding legal lenders’ rights, debt market development, guaranteed assets settlement and other areas of interest, the majority of NA members agreed with the government on the need for legal regulations streamlining credit debt recovery and credit institutional restructuring from 2016 to 2020.

Several NA’s members raised their concern over the cause of irrecoverable debts, asking that the resolution categorise and assign definite responsibilities to respective individuals and organisations whose debts have turned bad.

On this matter, Deputy Hoang Thi Thu Trang from Nghe An Province delegation explained that these debts stem from both credit institutions’ negligence in collateral appraisal and borrowers’ lack of legal awareness.

As such, uncollectible loans cannot be resolved without great difficulties and revisiting the current set of laws on credit. Trang also suggested that the resolution monitor banks and other credit institutes in confiscating and selling collateral assets in order to minimise clashes between lenders and borrowers.

Can Tho Province’s NA Deputy Nguyen Thanh Xuan urged the government to make clear examples out of entities responsible for uncollectible loans through strict sanctions, especially to prevent banks from issuing spontaneous write-offs or abusing their right in seizing borrowers’ collateral.

In agreement with Xuan, Mai Sy Dien, NA Deputy from Thanh Hoa Province, requested that the resolution clarify commercial banks’ motivations and objectives in issuing loans surpassing their actual market value of capital and surplus. He considered this an absolute approach to solving bad debt problems within credit institutions.

Xuan and Trang also expressed their appreciation for the resolutions, as there has yet to be a uniform legal framework in dealing with irrecoverable loans and protecting lenders’ entitlements.

Another matter was brought into discussion regarding the use of the state budget in relieving bad credit debts. Dien said that the Standing Committee of the National Assembly was against this solution as stated in the resolution draft, despite a few opposing opinions.

Deputy Luu Binh Nhuong from Ben Tre Province said that irrecoverable loans are a common burden for the entire system, with the State Bank of Viet Nam (SBV) taking the initiative in recovering these loans. Therefore, state intervention is much needed while dealing with bad debts, and the use of state budget will provide credit institutions with a significantly larger amount of capital than their own assets could provide.

According to report from the SBV, by the end of 2016, total uncollectible loans across all credit institutions had already accounted for 5.8 per cent of all loans and investments. If hidden debts are also taken into consideration, the total is 10.08 per cent of the entire economy’s outstanding debts. 

VNS