VAMC this year will use cash to buy NPLs. (Source: sbvamc.com.vn)

Hanoi (VNA) – The Vietnam Asset Management Company (VAMC) this year will use cash, departing from the usual practice of using only special bonds, to buy non-performing loans (NPLs), officials said.

Online newspaper Infonet quoted the company’s Chairman Nguyen Quoc Hung as saying that the new measure was aimed at accelerating the bad debt resolution process and supporting commercial banks so they have enough capital to boost their lending.

Under current regulations, VAMC issues special bonds in exchange for bad debts, which banks may use as collateral to secure funding from the central bank.

As most of the NPLs purchased from commercial banks are still stuck at the VAMC, experts expected that the step would help resolve the bad debt instead of moving it around.

Despite praising the new measure, however, experts are still concerned about the application, saying the size of the bad debts is large while the VAMC’s capital source is limited.

Banking expert Can Van Luc told Infonet that the use of cash to clear the bad debt was very good for boosting the bad debt resolution process, but it was unclear whether VAMC had sufficient funds to buy the bad debts or whether this was just the first step to creating the next catalyst.

According to VAMC, the company plans to settle roughly 30-35 trillion VND (1.33-1.55 billion USD) of purchased bad debts this year through retrieving the debts and selling them and mortgaged assets. The amount is nearly double that of last year.

Besides cash, the company will also issue roughly 40 trillion VND of special bonds to buy bad debts from credit institutions this year.-VNA