The National Assembly’s Economic Committee has agreed with the Government’s proposal on extending the validity of resolution No.42 on pilot bad debt management until December 31, 2023.

Vu Hong Thanh, chairman of the Economic Committee under the National Assembly. Photos: quochoi.vn

“Past results in treating bad debts under the resolution have been positive and helped further channel the capital into business and production activities,” said Vu Hong Thanh, chairman of the Committee at a discussion session held by the National Assembly on May 24.

Thanh noted the end of resolution No.42, originally scheduled for this August, may cause difficulties in treating bad debts.

“The extension of its validity period, therefore, would help ensure efficiency in treating bad debts, support businesses and people, and reduce risks of possible legal disputes on prospective disruption of current legal mechanism,” he added.

Thanh also urged the Government to soon issue a plan to restructure credit institutions and resolve the problem of bad debts during the 2021-2025 period.

“The State Bank of Vietnam (SBV) needs to further promote credit into priority fields, rather than those of high risks such as real estate or the stock market,” he said.

SBV Governor Nguyen Thi Hong.

SBV’s Governor Nguyen Thi Hong in the discussion noted that resolution No.42 allowed banks to speed up the process of recovering bad debts, including the confiscation of collateral assets. “In a normal case, this would not be feasible,” Hong said.

Entending the validity  of the resolution is of particular significance due to rising bad debts during the pandemic, Hong added, noting a high level of bad debts in the banking system would make it difficult for investors  to take  part in the ongoing process of restructuring credit institutions.

According to Hong, the resolution since its launch five years ago has helped treating VND380.2 trillion (US$16.4 billion) of bad debts, or 48% of the total in the banking system. This averaged around VND5.6 trillion ($241.4 million) per month, nearly double the amount being processed before the effectiveness of resolution No.42.