Government Approves Extension of Bad Debt Settlement Program

VIETNAM, March 30 –

A customer in a Sacombank office. The government has instructed the SBV to coordinate with the relevant agencies for the urgent finalization of the draft resolution on the extension of resolution 42/2017/QH14 to be submitted to the National Assembly. Photo cafef.vn

HÀ NỘI — The government has accepted a proposal from the State Bank of Vietnam (SBV) to expand the credit institutions’ bad debt settlement pilot project based on resolution 42/2017/QH14.

Under a decision issued late last week, the government instructed the SBV to coordinate with the relevant agencies for the urgent development of the draft resolution on the extension of the application of resolution 42 to be submitted to the National Assembly (AN).

The NA approved resolution 42/2017/QH14 on steering the settlement of bad debts of credit institutions in 2017, however, the policy will expire on August 15 this year.

So far, the SBV has also completed the draft resolution and made it public for comment. As part of the project, the SBV has proposed to extend the application of Resolution 42 until August 15, 2025. During the extension, the government will be responsible for studying and proposing to draft a new law on the settlement of bad debts of credit institutions.

To comply with current legal regulations on procedures and deadlines, the government will propose to the NA to allow the application of the shortened procedures to adopt the extended resolution at the NA meeting in May 2022, according to the draft. .

According to the SBV, after five years of implementation of the resolution, the settlement of bad debts of credit institutions has achieved positive results. Thus, from August 15, 2017 to November 30, 2021, 373.3 trillion VNĐ of bad debts were collected in accordance with Resolution 42. On average, some 5.66 trillion VNĐ of bad debts were processed monthly during the application of resolution 42, compared to about VNĐ2.14 trillion previously.

However, the outbreak of the COVID-19 pandemic has negatively affected the credit quality of the credit institution system. Bad debts have been increasing since 2020 and reached more than 2% at the end of November 2021. Many have warned that bad debts will continue to increase again due to the effects of the pandemic.

The SBV therefore proposed to legislate the policies specified in Resolution 42 in a new law to permanently enable the banking sector to settle bad debts of credit institutions. The enactment of a new law on the treatment of bad debts will help credit institutions to maintain and accelerate the treatment of bad debts in order to avoid potential risks to the economy. —VNS

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