There were about VNĐ116 trillion of outstanding debts in the Typhoon Yagi affected provinces and cities. Photo baotintuc.vn

The proposal is under an SBV draft circular on debt repayment restructuring for customers facing difficulties in repaying debts due to the natural disaster.

The draft circular focuses on supporting individual and corporate customers who are having difficulty repaying debts due to the direct impacts of Typhoon Yagi in provinces and cities including Hà Giang, Cao Bằng, Lạng Sơn, Bắc Giang, Phú Thọ, Thái Nguyên, Bắc Kạn, Tuyên Quang, Lào Cai, Yên Bái, Lai Châu, Sơn La, Điện Biên, Hòa Bình, Hà Nội, Hải Phòng, Hải Dương, Hưng Yên, Vĩnh Phúc, Bắc Ninh, Thái Bình, Nam Định, Hà Nam, Ninh Bình, Quảng Ninh and Thanh Hóa.

Borrowers who have outstanding principal debts arising before September 7, 2024, and have to repay the debts from September 7, 2024 to December 31, 2025, will be considered for the debt repayment extension.

To qualify for the extension, borrowers must prove that they or their business partners have been directly affected by the typhoon, which has caused them to face difficulties in debt repayment. Banks will assess the borrowers' solvency after the debt repayment period is restructured.

The review and restructuring of the debt repayment period will be carried out from the effective date of the draft circular to December 31, 2025.

According to the SBV, through the debt repayment extension, affected borrowers will have more time to stabilise their lives and restore production and business. At the same time, this is also a solution to reduce bad debt and support economic recovery.

In a newly released banking industry report, Vietcombank Securities Company (VCBS)'s analysts said bad debts arising from the impact of Typhoon Yagi are not currently too large compared to the total outstanding loans, although more time will be needed for further assessment.

According to preliminary statistics from the State Bank of Việt Nam (SBV), as of September 20 this year, there were about VNĐ116 trillion of outstanding debts in affected provinces and cities.

“The bad debt on the total outstanding debt will be low and will be lower next year due to the SBV’s instructions requiring commercial banks to be flexible in debt recovery. Commercial banks will make temporary forgiveness, deferral, rescheduling and interest reductions for loans that have or are about to mature,” the analysts said.

VCBS said the ratio of debts categorised as Group 2, or debts needing special attention, has improved, decreasing from 2.1 per cent in the first quarter of 2024 to 1.81 per cent in the second quarter of 2024. This indicates that the underlying pressure on worsening debts is not too high in the short term. The rate of new bad debts has also improved over the same period, decreasing from 0.28 per cent to 0.16 per cent.

However, the analysts noted, bad debt pressure remains high as of the end of the second quarter 2024, as the on-balance sheet bad debt ratio increased by five basis points to 2.22 per cent compared to the previous quarter, in part due to the economy and real estate continuing to face difficulties.

For the second half of this year, VCBS anticipates that pressure on bad debt will be manageable, as signs indicate a cooling down in bad debt levels alongside the economy’s recovery.

In addition, VCBS forecasts that bad debt will be different for different banks, depending on their asset quality. Banks with good assets will record a moderate level of bad or restructured debts, while banks with a high proportion of corporate credit (including corporate bonds) and a low bad debt coverage ratio may face bad debt risks and rising provisioning pressure through 2025. — VNS