Settling non-performing loans (NPLs) has been easier since the application of Nation Assembly’s Resolution 42 a year ago, but detailed guidance is still needed to make the use of the regulation smoother, industry insiders said.

Bad debt ratio at Vietnam’s credit institutions dropped from 3.61 per cent in 2013 to 2.18 per cent by the end of June. 

Enhanced legal frameworks in Resolution 42, which allows credit institutions and the Vietnam Asset Management Company (VAMC) to rapidly repossess collateral if a borrower defaults, have helped institutions and VAMC manage bad debts. 

However, Tran Van Du, Deputy General Director of the Bank for Agriculture and Rural Development (Agribank), said the Ministry of Finance issued a document in April this year regulating the implementation of Resolution 42, but the document doesn’t provide detailed guidance on tax payment when dealing with collaterals of NPLs.

It was still difficult to sell the assets due to the tax payment issue, Du said, explaining that buyers struggled to get the assets after buying them as the tax wasn’t paid.

He suggested there should be clearer legal guidelines on paying taxes when auctioning collateral.

Representatives from Vietcombank said that authorities in some cities and provinces are still cautious and do not want to help credit institutions repossess collaterals.

In addition, though credit institutions have the right to repossess collaterals according to Resolution 42, they still have to initiate lawsuits to be entitled to handle the collateral if borrowers deliberately oppose them.

As such, credit institutions could only repossess collateral successfully in cases where collateral was vacant land or borrowers had fled while collateral was not under dispute, the Vietcombank representative said, adding that this limited the bad debt settlement of credit institutions.

According to Deputy Governor of the State Bank of Vietnam (SBV) Nguyen Kim Anh, Resolution 42 has helped resolve many difficulties in settling bad debts, and the above mentioned difficulties are just encountered during the implementation of the resolution and the SBV will report to the Government to fix them.

Anh also affirmed that with Resolution 42, legal regulations for bad debt settlement at credit institutions and VAMC are adequate and effective so he urged VAMC to better settle bad debts.

In the future, VAMC needs to be more active in finding partners and investors for brokerages, buying and selling of bad debt and collaterals and striving to take a key role in the country’s trading debt and collateral, Anh said.

Run by SBV since it was established in 2013, VAMC is responsible for purchasing NPLs from local banks and handling them on the lenders’ behalf. VAMC plans to recover 24.89 trillion VND (1.09 billion USD) of NPLs in 2018. It also aims to buy some 30.5-35.5 trillion VND (1.34-1.56 billion USD) of NPLs from credit institutions this year.

According to VAMC Chairman Nguyen Tien Dong, thanks to Resolution 42 becoming effective last year, the company recouped 30.85 trillion VND (1.35 billion USD) of NPLs in 2017, equal to nearly two thirds of the total NPLs recouped in 2013-2016.

Bad debt ratio at Vietnam’s credit institutions dropped from 3.61 percent in 2013 to 2.18 percent by the end of June, the SBV reported.-VNS