Policy on rescheduling debt repayment period extended

The State Bank of Vietnam (SBV) has decided to allow commercial banks to reschedule the debt repayment period and maintain the debt group for certain sectors for an additional six months, to support struggling businesses.

At a recent conference held in Hanoi, the SBV said the decision would hold until the end of the year, rather than as previously agreed, expiring at the end of this month.

The extension is expected to reduce pressure on companies which are struggling to service their debts and support economic recovery under the current challenging economic situation.

An additional six months is welcomed by most businesses, as well as the banking sector, both of whom were concerned over their ability to meet the payment deadline of June 30.

The change (Circular 02/2023/TT-NHNN) was made as reports show while existing bad debts have not been resolved, additional new bad debts were expected to surge with the deadline on certain sectors expiring at the end of this month.

Dr Tran Duc Thuc from Ho Chi Minh City University warned that provisions for risky debts were still increasing and in spite of support, banks' bad debts were still rising.

According to Thuc, bad debt will increase in 2024 when corporate bonds come to maturity. The sale of assets is also difficult, so firms do not have money to service debt or to pay bonds. If banks are not allowed to extend the payment deadline of existing debts, the debts will be transferred to an even more poorly functioning debt group.

At the conference, the SBV’s Governor Nguyen Thi Hong said as of June 14 this year, credit increased by 3.79% against the end of last year. According to the Government’s targets, credit growth by the end of the second quarter of 2024 is set to reach 5-6% and 15-16% for the whole year.

According to the Governor, credit growth still has to control risks, ensure the safety of the banking system and focus on economic growth drivers, including those meeting the new trends such as green credit.

The SBV said it would proactively manage credit growth to contribute to controlling inflation, stabilising the macroeconomy and supporting economic growth.

Credit institutions must promote credit safely, effectively, accurately and promptly meet the capital needs of the economy, the SBV said, adding the institutions must direct lending to production, business and priority sectors and key economic growth drivers./.