Logo of Phnom Penh Post newspaper Phnom Penh Post - Vietnam debt policy to benefit borrowers

Vietnam debt policy to benefit borrowers

Content image - Phnom Penh Post
The Vietnamese central bank’s revised policy aims to support borrowers who have been adversely affected by the Covid-19 pandemic. PHAP LUAT

Vietnam debt policy to benefit borrowers

Borrowers will be the beneficiary of a newly-issued State Bank of Vietnam (SBV) circular on extending debt rescheduling as it helps them to keep cash flows stable, experts have said.

The SBV last week issued Circular 14/2021/TT-NHNN, which revised Circular 03/2021/TT-NHNN, allowing banks to extend the repayment term for customers by another six months compared to Circular 03, until June 30, 2022.

In addition, the restructuring of overdue debts will also be extended from July 17, 2021 to before September 7, 2021.

According to Pinetree Securities Co analyst Nguyen Dinh Duong, the circular was issued to directly support borrowers who have been adversely affected by the Covid-19 pandemic. However, the circular will not help banks gain more profits in the remaining months of the year.

Duong explained banks would not be the beneficiary of the new circular as the new policy kept the time of provisions on Covid-19 loans unchanged compared with Circular 03/2021/TT-NHNN to ensure the safety of credit institutions and the national financial system.

Under the new circular, banks will still have to increase the ratio of the provisions gradually, from 30 per cent of Covid-19-affected loans by the end of 2021 to 60 per cent by the end of 2022 and 100 per cent by the end of 2023 as stated in the previous circular, he said.

Sharing the same view, Phan Le Thanh Long, director of the Australian Institute of Corporate Management Accountants (CMA Australia) in Vietnam, said the circular targeted bank borrowers as it aimed to support firms which have been greatly affected by the pandemic.

According to the new circular, firms will also see lending interest rates and fees exempted or reduced, which will have a direct impact on helping firms stabilise cash flow, especially when they have to spend significantly to keep business and production going during the pandemic.

According to the SBV’s statistics, banks restructured loans worth about 350 trillion dong ($15.2 billion) for Covid-19-affected borrowers by the end of 2020. Industry insiders estimated if half of the loans became bad loans, the bad debt ratio of the banking system would increase to more than three per cent by the end of this year.

To control the risk of bad debt, banking expert Nguyen Tri Hieu recommended that besides recovering bad loans, banks must set aside provisions for bad and risky loans.

Some banks have already increased provisions for risky loans.

The state-owned Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank), for example, increased its provisions from 120 per cent in 2019 to 130 per cent of loans in 2020.

In 2021, VietinBank aimed to keep the bad debt ratio below two per cent.

VIET NAM NEWS/ASIA NEWS NETWORKM

MOST VIEWED

  • Wing Bank opens new branch in front of Orkide The Royal along Street 2004

    Wing Bank celebrates first anniversary as commercial bank with launch of brand-new branch. One year since officially launching with a commercial banking licence, Wing Bank on March 14 launched a new branch in front of Orkide The Royal along Street 2004. The launch was presided over by

  • Girl from Stung Meanchey dump now college grad living in Australia

    After finishing her foundational studies at Trinity College and earning a Bachelor’s degree from the University of Melbourne in 2022, Ron Sophy, a girl who once lived at the Stung Meanchey garbage dump and scavenged for things to sell, is now working at a private

  • Ministry orders all schools, public and private, to close for SEA Games

    From April 20 to May 18, all public and private educational institutions will be closed to maintain order and support Cambodia's hosting of the 32nd SEA Games and 12th ASEAN Para Games, said a directive from the Ministry of Education, Youth and Sport. Cambodia will host the

  • Wat Phnom hornbills attract tourists, locals

    Thanks to the arrival of a friendly flock of great hornbills, Hour Rithy, a former aviculturist – or raiser of birds – in Kratie province turned Phnom Penh tuk tuk driver, has seen a partial return to his former profession. He has become something of a guide

  • Almost 9K tourists see equinox sunrise at Angkor Wat

    Nearly 9,000 visitors – including 2,226 international tourists – gathered at Angkor Wat on March 21 to view the spring equinox sunrise, according to a senior official of the Siem Reap provinical tourism department. Ngov Seng Kak, director of the department, said a total of 8,726 people visited Angkor Wat to

  • Angkor Beer strengthens national pride with golden new look and fresher taste

    Angkor Beer – the "Gold of Angkor" – has a new look, one that is more stylish and carries a premium appeal, as well as a fresher taste and smoother flavour, making it the perfect choice for any gathering. Angkor Beer recently launched its new design, one