A transaction office of VietinBank (Photo: VietinBank)

Hanoi (VNA) - Prime Minister Nguyen Xuan Phuc has taken action so that the National Assembly’s new resolution on bad debt settlement could be applied from August 15.

The PM issued Directive 32/CT-TTg, stating that all regulations to guide the implementation of the NA resolution on settling non-performing loans must be issued before August 15, the date the resolution takes effect, a move that reflects the Government’s determination to settle bad debts.

Under the directive issued on July 19, Phuc assigned the Ministry of Justice to direct the enforcement agencies at all levels to rapidly settle lawsuits, which have taken legal effect, related to bad debts of credit institutions and the Vietnam Asset Management Company (VAMC).

The ministry will also be responsible for drafting a decree on collateral transaction, which will be submitted to the Government for approval.

The directive orders the Ministry of Public Security to direct its agencies to maintain security and social order when credit institutions and the VAMC exercise their legal right to confiscate and sell collateral assets of bad debts as per the regulations stated in the resolution.

The Ministry of Natural Resources and Environment must direct its property ownership registration agencies to carry out procedures to transfer the property ownership and use rights to legal purchasers and assignees of bad debts, as stipulated in the resolution.

The PM also entrusted the Ministry of Planning and Investment to co-operate with relevant agencies to map out plans to disburse State budget in order to pay arrears for the Government’s infrastructure construction projects.

Under the directive, PM Phuc required the State Bank of Vietnam (SBV) to closely supervise and inspect credit institutions and the VAMC in the implementation of the resolution.

[Infographics: Over 27 billion USD of bad debts settled]

The central bank must also work out with relevant ministries and agencies a streamlined legal framework proposal for settling bad debts and collateral assets and submit it to the Government before August 15, 2021, based on effects of the enforcement of the resolution.

Besides enhancing supervision, the SBV must also take responsibility for streamlining current legal regulations on the governance of credit institutions, especially risky governance, and credit granting for credit so as to minimise bad debts the next time.

Last month, NA deputies ratified the resolution on dealing with banks’ bad debts. Experts have applauded the resolution, saying it is necessary to reduce the bad debt ratio of credit institutions, including the debts sold to VAMC, to below 3 percent.

With the resolution, credit institutions and the VAMC can trade bad debts in an open, transparent manner at market prices, in accordance with the law, they said.

Huynh Minh Tuan from VnDirect Securities said the resolution would perform the important job of clearing away congestion in the economy, which agencies have been trying to do for the past five to six years but only with modest success. Now, the resolution will give more rights to credit institutions to liquidate mortgaged assets, thereby helping to avoid prolonged lawsuits related to debt collection and reducing capital costs.

According to an SBV report, by the end of 2016, non-performing loans across all credit institutions accounted for 5.8 per cent of the institutions’ total outstanding loans. If hidden debts are also taken into consideration, the total is 10.08 percent.-VNA