Dealing with bad debts

In order to fully solve bad debts that hinder the development of the economy, many legal documents and directives were issued and have brought about positive effects. However, there are still problems and difficulties in handling bad debts.  
dealing with bad debts Dealing with bad debts after one year of Resolution 42
dealing with bad debts Dealing with bad debts: time for ending!
dealing with bad debts The law for bad debts: Bottleneck could be removed?
dealing with bad debts
From August 15, 2017 to August 31, 2019, the banking system handles about VND9.6 trillion of bad debt on average each month. Photo: S.T.

Dealing with VND9.6 trillion of bad debt each month

National Assembly Resolution No. 42/2017 / QH14 on piloting the handling of bad debts of credit institutions (Resolution 42), effective from August 15, 2017, is an important legal basis for dealing with bad debts. The resolution has removed many obstacles in dealing with bad debts, while increasing autonomy for banks and raising the awareness of debt payers. Besides, a series of guidelines by the Government, the State Bank (SBV), the Ministry of Finance, the Ministry of Justice, and the Supreme People's Court have been issued to help the resolution come into practice. According to experts, the legal corridor for dealing with bad debts is relatively complete, closer to the common regulations commonly found in countries with developed legal systems.

Reporting on the results after two years of handling bad debts under Resolution 42, Mr. Nguyen Van Du, acting Chief of Inspection and Supervision of the State Bank, said that the bad debt ratio in the balance sheet (according to Circular No. 02) of the system of credit institutions continues to be maintained below 2 percent (as of August 31, 2019 it is 1.98 percent). Accumulated from August 15, 2017 (the time when Resolution 42 took effect) to August 31, 2019, the whole CI system has handled VND236.8 trillion of bad debts determined under Resolution No. 42. Calculated on average, from August 15, 2017 to August 31, 2019, the whole system handled about VND9.6 trillion per month, VND4.7 trillion higher than the average of bad debt before the resolution.

Mr. Pham Quang Dung, General Director of Vietcombank, said that Resolution 42 has cleared the "bottlenecks" of the economy, increasing resources for economic development. Over the past two years, Vietcombank's bad debt handling has increased significantly. In previous years, Vietcombank normally collected from VND1,500-2,000 billion of off-balance sheet debt, but the last two years has increased significantly. In 2018, off-balance sheet debt collection reached VND3,200 billion, while this year it is expected to be higher.

Similarly, at Agribank, Mr. Pham Toan Vuong, Deputy General Director of Agribank, said that customers are more responsible and aware of debt repayment. Of the more than VND 140,000 billion of debt that needs to be dealt with, in the past 2 years, Agribank has recovered VND 110,000 billion, of which customer recovery is about VND 60,000 billion. In addition, many barriers have been removed, including allowing credit institutions to handle debt recovery below the cost price, sell debt at market prices, and the recovery mechanism is prioritized to pay and recover the principal first.

Many obstacles

One of the problems in dealing with bad debts mentioned by banks is related to tax. Mr. Pham Toan Vuong said that there are many assets that ensure Agribank makes auctions successful, but some tax agencies and localities apply in a different way, leading to the time that the recovered assets are extended, causing damage to purchasers due to their inability to convert or transfer their names to continue using properties in service of production and business. Typically, the Thanh Liem cement project, which is deferred to 20 years, but when the auction is successful, the tax authority requires an immediate payment of VND40 billion even though the bank has written a request for tax exemption, reduction or extension.

Vietcombank's leaders expressed their wish that in the future, the General Department of Taxation will provide specific documents to guide the tax department to implement the principles set out in Resolution 42. There are still some local tax departments which have different applications such as: requesting businesses to complete all tax obligations before completing the procedures related to land use right, transfer property rights, while Resolution 42 states that the principle is the priority to pay secured debt obligations of the CI when there are collateral assets related to the cases.

Another problem that also makes the dealing with bad debts difficult is the sudden appearance of disputes when banks seize collateral. As a recent case at Agribank’s Ho Chi Minh City branch, a borrower has mortgaged a project in Binh Duong since 2000. After 10 years of unsolvable customers agreed to cooperate with the bank to implement property auction, the bank and this customer had 13 auctions to sell bad debt, however, the customer said the auction was against the regulations and sue the bank, causing the execution of the sentence to be suspended. Although this case has been inspected and concluded by the Ministry of Justice in accordance with the auction process, the Prime Minister has issued a written direction. At present, the People's Court has accepted and not allowed to transfer or cause damage to the bank because the transaction could not be performed.

Also at Agribank, Mr. Pham Toan Vuong said that the application of simplified procedures in the court has not been implemented. Agribank has more than VND100,000 billion of bad debt from 1 million customers that need to be handled under Resolution 42, including nearly 7,000 disputes arising through civil courts. But according to the representative of Agribank, over the past 2 years, there have been more than 10 cases and no case has applied for simplified procedures at the court, the remainder has been instructed by the court to apply normal procedure.

Clearly, the above problems show that the process of dealing with bad debts and the implementation of tasks related to handling of bad debts are still stuck due to different understanding in each agency and locality. But this is easy to understand because "bad debt" is always a very sensitive issue, making the relevant organizations deal with it carefully. Vietcombank's general director said that prudence in the handling of bad debts is necessary, so when the regulations go into practice, there should also be "latency" for the management agencies to perform smoothly and systematically.

dealing with bad debts Need an objective look at bad debts

VCN – Bad debts and dealing with bad debts have always been an important and urgent mission ...

From the problems mentioned above, according to financial experts, in order to perform the process of handling bad debts and the implementation of Resolution 42 more effectively, meeting the requirements; local authorities and management agencies need to be quick and proactive to solve the problems. But the most critical issue is the debt trading market; the authorities need to build a complete market for debt trading activities to be public, transparent and vibrant. These solutions will help to deal with bad debts easily.

By Huong Diu/Bui Diep

Related News

Enterprises face difficulties in tax refunds due to partners closing

Enterprises face difficulties in tax refunds due to partners closing

VCN - On December 13, at a dialogue conference on tax and customs policies and administrative procedures organized by the Ministry of Finance in coordination with the Vietnam Chamber of Commerce and Industry (VCCI), enterprises proposed solutions to many problems related to tax policies such as VAT refunds, tax declaration procedures, electronic invoices, etc.
Bad debt at banks continues to rise in both amount and ratio

Bad debt at banks continues to rise in both amount and ratio

VCN - After nine months of 2024, bad debt balances at banks continue to rise, potentially posing risks to the banking sector if control measures aren't implemented.
Import-export activities through Cau Treo border gate (Ha Tinh): When will the difficulties end?

Import-export activities through Cau Treo border gate (Ha Tinh): When will the difficulties end?

VCN - Since the end of 2023, difficulties in traffic infrastructure and parking lots have caused import-export activities through Cau Treo international border gate (Ha Tinh) to fall into a lull. That has caused the import-export turnover through this border gate since the beginning of the year to decrease by nearly 50% compared to the same period in 2023.
Customs finds difficulties because there is no e-cigarette management policy

Customs finds difficulties because there is no e-cigarette management policy

VCN - E-cigarette products are invading and being used more and more commonly in our country, especially among young people, teenagers, and students. Meanwhile, there is currently no management policy for this item, making it difficult for Customs to determine violations and apply sanctions.

Latest News

Vietnam

Vietnam's stock market to develop strongly and sustainably

VCN - This was emphasized by Minister of Finance Nguyen Van Thang at the Conference to review the work of 2024 and deploy the work of 2025 of the State Securities Commission (SSC) held on the afternoon of December 18.
Tax sector achieves revenue target of about VND1.7 million billion

Tax sector achieves revenue target of about VND1.7 million billion

VCN – Motivated by the revenue collection by the end of December 2024, the General Department of Taxation has accomplished the revenue collection.
General inventory of public assets raises efficiency of use and management of country

General inventory of public assets raises efficiency of use and management of country's resources

VCN – The implementation of the General Inventory Project by the Ministry of Finance, ministries, central and local agencies has ensured progress according to Project 213 and the plan issued by the Ministry of Finance. This is the information provided by a representative of the Department of Public Asset Management (Ministry of Finance) at the press conference on the implementation of the General Inventory Project of public assets organized by the Ministry of Finance on the afternoon of December 18.
Publicizes progress of public investment disbursement for important national projects

Publicizes progress of public investment disbursement for important national projects

VCN – Important national projects, inter-regional transport projects, riverbank and coastal erosion treatment projects all have disbursement rates lower than the estimated average disbursement rate of the whole country, the Ministry of Finance said.

More News

Six SOEs to be transferred back to industry ministry

Six SOEs to be transferred back to industry ministry

Six State–owned enterprises (SOEs) with a total State stake of 800 trillion VND (31.5 billion USD) will be transferred back to the Ministry of Industry and Trade (MoIT) after six years under the management of the Commission for the Management of State Capital at Enterprises (CMSC).
PM urges stronger measures to manage interest rates

PM urges stronger measures to manage interest rates

Prime Minister Pham Minh Chinh has asked the State Bank of Vietnam (SBV) to proactively, flexibly, promptly, and effectively manage the monetary policy in combination with the expansionary fiscal policy and others.
Six SOEs to be transferred back to industry ministry

Six SOEs to be transferred back to industry ministry

Six State–owned enterprises (SOEs) with a total State stake of 800 trillion VND (31.5 billion USD) will be transferred back to the Ministry of Industry and Trade (MoIT) after six years under the management of the Commission for the Management of State Capital at Enterprises (CMSC).
Vietnamese products: Conquering foreign customers in supermarket systems

Vietnamese products: Conquering foreign customers in supermarket systems

VCN - According to the Ministry of Industry and Trade, the proportion of Vietnamese goods in distribution channels currently reaches more than 80% in supermarkets and 60% or more in traditional retail channels. For many retailers, Vietnamese goods have become a growth driver as they not only do business successfully in the domestic market but also export.
Answering many questions from businesses at dialogue conference on tax and customs policies

Answering many questions from businesses at dialogue conference on tax and customs policies

VCN - Many opinions and recommendations related to tax and customs issues were raised by the business community at the dialogue on tax and customs policies and administrative procedures in 2024, organized by the Ministry of Finance.Representatives of the Ministry of Finance, the General Department of Taxation, and the General Department of Customs provided specific responses, and affirmed that they will continue to research and advise on the assessment, review, and amendment and supplementation of appropriate regulations.
Strengthen the management and use of electronic invoices for e-commerce

Strengthen the management and use of electronic invoices for e-commerce

VCN - Prime Minister Pham Minh Chinh requested ministries, branches and localities to strengthen the management and use of electronic invoices and improve the efficiency of tax collection for e-commerce.
Ministry of Finance proposes comprehensive amendments to the Personal Income Tax Law

Ministry of Finance proposes comprehensive amendments to the Personal Income Tax Law

VCN - The Ministry of Finance has just completed the proposal to draft the Personal Income Tax Law (PIT) and officially solicited public comments. By amending and supplementing nearly 90% of the total number of articles of the current PIT Law, the Ministry of Finance has submitted to the Government for permission to propose the draft PIT Law to replace the PIT policy system. The project is expected to be approved by the National Assembly in May 2026.
Expansionary fiscal policy halts decline, boosts aggregate demand

Expansionary fiscal policy halts decline, boosts aggregate demand

VCN - Customs News interviews Ms. Nguyen Thanh Nga, Deputy Director of the Institute for Financial Strategy and Policy (Ministry of Finance).
Ministry of Finance stands by enterprises and citizens

Ministry of Finance stands by enterprises and citizens

VCN - This was the affirmation of Deputy Minister of Finance Cao Anh Tuan at the 2024 Dialogue Conference on Tax and Customs Policies and Administrative Procedures. The conference, jointly organized by the Ministry of Finance and the Vietnam Chamber of Commerce and Industry (VCCI) on December 10, attracted 530 enterprises from the northern region.
Read More

Your care

Latest Most read
Vietnam

Vietnam's stock market to develop strongly and sustainably

VCN - This was emphasized by Minister of Finance Nguyen Van Thang at the Conference to review the work of 2024 and deploy the work of 2025 of the State Securities Commission (SSC) held on the afternoon of December 18.
Tax sector achieves revenue target of about VND1.7 million billion

Tax sector achieves revenue target of about VND1.7 million billion

VCN - With the determination to accomplish the revenue collection to create resources for economic development under the Prime Minister's direction, the entire Tax sector has made efforts to perform the revenue collection in the last days of 2024.
General inventory of public assets raises efficiency of use and management of country

General inventory of public assets raises efficiency of use and management of country's resources

VCN – The implementation of the General Inventory Project by the Ministry of Finance, ministries, central and local agencies has ensured progress according to Project 213 and the plan issued by the Ministry of Finance. This is the information provided by
Publicizes progress of public investment disbursement for important national projects

Publicizes progress of public investment disbursement for important national projects

VCN - The Ministry of Finance has issued Document No. 13213/BTC-DT to publicize the progress of public investment disbursement of key national projects.
Six SOEs to be transferred back to industry ministry

Six SOEs to be transferred back to industry ministry

Six State–owned enterprises (SOEs) with a total State stake of 800 trillion VND (31.5 billion USD) will be transferred back to the Ministry of Industry and Trade (MoIT) after six years under the management of the Commission for the Management of State Capital at Enterprises (CMSC).
Mobile Version