Nghe An controls and handles to reduce bad debt

Efforts to control bad debt

Mr. Cao Song Diep - Head of Credit Risk Management Department,State Bank of Vietnam, Nghe An Branchshare: The issue of bad debt has always been one of the contents of state management of banks. Currently, facing the rather sensitive and complicated developments of the capital market and the development and fierce competition of credit institutions, since 2017, the Prime Minister has approvedProject on restructuring credit institutionsassociated with bad debt settlement in the period 2016-2020. In addition, the National Assembly also issued Resolution No. 42/2017 on piloting bad debt settlement of credit institutions.

Customers transact at Agribank Nam Nghe An Transaction Office. Photo: Nguyen Hai

According to this project, in Nghe An, a number of weak commercial banks have been restructured when merging into large branches. Accordingly, Vietinbank took over the Ocean Bank branch, BIDV took over the Mekong Delta Bank branch MB, Vietcombank took over the Construction Bank branch CB Bank... In parallel with restructuring and stabilizing the apparatus of the new legal entity, to ensure the rights of customers, the State Bank has directed commercial banks to synchronously implement solutions for sustainable credit growth, focusing on controlling and synchronously implementing solutions to handle bad debts.

In Nghe An, through regular monitoring, the State Bank of Vietnam Nghe An Branch also organized direct working sessions with credit institutions with bad debts above 3%, together with the units to re-evaluate the detailed status of each bad debt, analyze difficulties and problems and request the units to develop specific handling plans for each bad debt. The State Bank of Vietnam Provincial Branch also directed the entire banking sector to actively coordinate with local authorities and competent agencies in the area to effectively handle bad debts, especially bad debts determined under Resolution 42 and bad debts lent under Decree 67/2014/ND-CP.

Customers transact at the Head Office of Agribank, Nam Nghe An Branch. Photo: Nguyen Hai

On the other hand, at certain times such as the beginning of the year or when the credit situation has special circumstances, when the Government or the State Bank has written instructions on credit work, including instructions to limit lending to areas with potential risks such asreal estate loans, stock investment, loan financing for BOT, BT traffic projects or corporate bonds; New regulations on limits and safety ratios in the operations of banks, foreign bank branches, operations of credit institutions... the State Bank of Vietnam Provincial Branch has promptly deployed guiding documents, rectified or strictly controlled credit granting; reviewed and issued warning and reminder documents for units with large bad debts...

Cua Hoi port area is where ships are anchored and auctioned by commercial banks due to bad debts and inability to pay debts. Photo: Nguyen Hai

In addition to the above solutions, the representative of the State Bank of Nghe An Branch also said: Every quarter and every year, on the basis of random selection, the State Bank of the province branch also organizes surprise inspections and supervision of credit activities with potential risks; inspects and evaluates the lending process, the actual purpose of using the loan capital and the repayment status of principal and interest...

With the above great efforts, bad debt at Nghe An Commercial Banks in recent years has always been well controlled, the bad debt ratio in the area is always lower than the average bad debt ratio of the whole country (less than 1% of total outstanding debt). Specifically, by the end of May 31, 2022, the total bad debt of units in the province is estimated at VND 1,800.3 billion, accounting for 0.68% of total outstanding debt; the bad debt ratio of the whole country as of March 31, 2022 is 1.49% of total outstanding debt.

(Representative of the State Bank of Vietnam, Nghe An Branch said)

Nanbad debt settlement for ship loan 67/CP

With the general bad debt ratio as above, Nghe An Commercial Banks are a bright spot.bad debt loan ship 67/CPis a minus point of Nghe An banks. Of the total 1,800.3 billion VND of bad debt as of May 31, 2022, 608.1 billion VND is the principal debt of 100 ships with debt repayment obligations. Currently, of the total 104 ships funded by bank loans for new construction, except for 4 ships with problems that have paid off the loan, 62 ships are currently transferred to bad debt with a total bad debt value of 433.8 billion VND, accounting for 71.3% of the principal debt according to Decree 67/CP.

Offshore fleets of Nghi Loc and Dien Chau are anchored at the southern shore of Cua Lo port. Photo: Nguyen Hai

The State Bank representative said: Of the total 104 ships lent, Agribank Nghe An Branch lent the most with 39 ships, followed by Viettinbank Bac Nghe An with 27 ships, Vietinbank Vinh with 12 ships. Similarly, for iron and composite ships, BIDV Phu Dien Branch lent 15 ships, BIDV Nghe An 3 ships.

At Vietinbank Bac Nghe An Branch, with 27 ships, the Branch lent a total capital of 178.17 billion VND. Up to now, 83.68 billion VND has been recovered, the remaining 94.49 billion VND is overdue debt and bad debt. Except for 2 ships with incidents that have been settled, the Branch has 25 ships, 13 of which are operating and have been facilitated, 12 ships are in the bad debt group and are in the process of filing a lawsuit, of which 4 ships are serving their sentences.

Talking to us, a representative of Vietinbank Bac Nghe An Branch shared: The unit is not subject to the National Assembly's Resolution 42 on piloting bad debt, the reason is that if not counting bad debt for ship loans according to Decree 67/CP, the branch only has 20 million VND as bad debt, less than 0.005% of total outstanding debt. Although knowing that debt recovery through lawsuits will encounter many difficulties and obstacles, the unit has no other choice to preserve and recover capital.

Officers of the interdisciplinary team at the Port Management Board check documents and complete departure procedures for fishermen going fishing at Lach Quen Port, Quynh Luu. Photo: Nguyen Hai

At BIDV Phu Dien Branch, Mr. Ha Huy Hung - Deputy Director of the Branch also said: The unit lent 15 ships, although less than some branches, but because there are 7 iron-hulled ships, each ship from 16-17 billion VND, the total outstanding debt is quite large. Specifically, the outstanding debt is 163 billion VND, up to this point, 127 billion VND has been recovered, the remaining amount, although the ships are still operating, but nearly 100% is bad debt.

From the practice of monitoring debt collection and bad debt settlement of Decree 67/CP vessels of banks, we have found that each Commercial Bank Branch has a different way of handling the matter. According to the representative of the State Bank of Nghe An Branch, controlling and handling bad debt at Nghe An Commercial Banks is now just a matter of handling and resolving bad debt of 67/CP vessels. This is a rather difficult problem because the outstanding debt is too large, many 67/CP vessels, due to subjective and objective reasons, are not fishing effectively due to declining aquatic resources, and increasing fuel prices, so many fishing vessels are forced to stay ashore. The goal of lending to fishermen to build vessels to go offshore and stick to the sea for fishing has not been achieved.

Due to the sharp increase in oil prices, many offshore fishing vessels have accepted to stay ashore instead of going offshore, which can easily increase bad debt. In the photo, the vessel is located ashore at Cua Hoi port at the end of May 2022. Photo: Nguyen Hai

To proactively resolve difficulties and handle bad debts in general and shipbuilding debt 67/CP in particular, recently, the State Bank of Vietnam, Nghe An Branch, reported and was agreed by the Provincial People's Committee, Provincial People's Council, and Provincial National Assembly Delegation to include the solution to handle bad debts of ship 67/CP in the National Assembly's agenda.

Accordingly, the banking sector recommends that, along with measures to initiate lawsuits to recover debts from seized or degraded vessels, the Government should have solutions to freeze and write off debts for fishing vessels facing force majeure risks; extend debt repayments and reduce loan interest rates for fishermen during difficult fishing periods; consider continuing to support interest rates equal to the remaining time of the vessel to create conditions for fishermen to reinvest and repair their vessels to return to sea.

Due to the high oil prices, the products that people catch near the shore are sold there, so according to the representative of the Fisheries Department, to reduce bad debts, banks encourage people to go offshore to fish and at the same time stick to the area and stick to the ship to collect debts. Photo: Nguyen Hai

According to the latest information, the Ministry of Agriculture and Rural Development has completed and submitted amendments to replace Decree 67/CP on fisheries development policy in the new period, accordingly, the loan support policy will have more innovations and focus. Along with loans for new shipbuilding, the Government also prioritizes support for aquaculture and onshore processing to restructure the fisheries industry towards reducing the proportion of exploitation.