Half a million billion dong of bad debt 'cleared' in 4 years

Nearly half of the VND500 trillion of bad debt resolved since 2012 has been through debt sales, while the amount cleared through collateral handling is less than 1%.

The above information was just announced by Deputy Governor of the State Bank - Nguyen Kim Anh at the Workshop on the right to handle collateral assets of banks held on December 6. Associate Professor, Dr. Nguyen Kim Anh assessed that the banking industry has made efforts to use many measures to handle bad debt in the past 4 years. By the end of 2015, the whole industry had "cleaned up" 493,000 billion VND of bad debt. 55.4% was collected and handled by the banks themselves. The rest was sold through the National Debt and Asset Trading Company (VAMC) and sold to a number of other organizations and individuals.

Banks are constantly at a loss in recovering collateral that should be theirs after customers default on payments.

According to Mr. Nguyen Kim Anh, more than 90% of bad debts have collateral, so promoting the sale and auction of these assets needs to be focused on. However, debt recovery through this form has only reached less than 14,000 billion VND, accounting for less than 1% of the bad debts handled.

Dr. Vu Dinh Anh also believes that resolving bad debts through handling collateral assets also helps reduce the burden on the budget's financial resources with "blood clots". According to him, banks selling and quickly auctioning collateral assets not only helps to immediately and completely handle a series of bad debts, unblocking credit but also activates a huge amount of assets worth hundreds of thousands of billions of VND that are lying dormant. Thanks to that, it increases the supply for the real estate, financial and commodity markets.

In fact, many banks say that when customers are unable to pay, it is extremely difficult for banks to carry out procedures to recover and handle collateral.According to a representative of Vietnam Prosperity Bank (VPBank), the problem lies with many parties, from the application of the law by competent authorities to the process of handling through lawsuits and the execution stage. "The viewpoint of building and enforcing the law needs to be changed, that is, the priority must be to protect the interests of the creditor instead of the debtor, that is, to protect the full ownership of the loaned money, instead of protecting the limited ownership of the borrowed money or the property that has been used as security for the debt repayment obligation," said a representative of this bank.

Similarly, a representative of Vietnam Technological and Commercial Joint Stock Bank (Techcombank) also said that debt settlement is slow or delayed due to complicated and lengthy litigation and enforcement procedures. "Therefore, many customers who want to delay debt repayment have used this procedure to request the bank to resolve the dispute through the court to delay the settlement," he said.

Another speaker also cited figures from the World Bank’s Doing Business 2017 Report to show that the process of resolving collateral through the courts is very thorny. Accordingly, the average time to resolve disputes in Vietnam through the courts is 400 days, with a cost of 29% of the debt value. Vietnam’s Judicial Proceedings Quality Index is only 6.5 out of 18.

At the same time, a report by the General Department of Civil Judgment Enforcement, Ministry of Justice also showed that in 2016, there were still nearly 16,000 unresolved civil judgment enforcement cases related to bank credit, with a total amount of nearly VND59,000 billion.

According to VNE