Banks have promoted consumer lending in recent years (Photo nld.com.vn) The Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank)recently announced it would sell consumer loans to recover debts. Accordingly,the debts belong to many borrowers and are valued from 1.68 million VND to 17.58million VND. The book value of the debts includes principal, interest andpenalties.
Notably, these consumer debts are unsecured and the starting price is equal tothe book value. The bank also requires deposits equal to the starting sellingprices from customers who want to buy the debts.
The sale of unsecured consumer debts is uncommon in Vietnam as previously banksoften made public only bad debts for sale to handle and recover them, and theyalways had collateral such as real estate, machinery, equipment, factories andcars.
According to a representative of VietinBank, selling consumer debts is one ofthe bank's legal business operations to handle and recover debts. Though thedebts aren’t non-performing loans, banks can still sell them.
Financial expert Huynh Trung Minh said customers often repay consumer debts ontime, such as installment purchases or small consumer loans, so the bad debtratio of such loans is very low.
Minh believed the sale of consumer debts are useful for buyers who would liketo have the address and information of the borrowers so they can enlarge theirdatabase and access new potential customers. In foreign countries, therefinancing business segment, or relending to customers who are in debt butsolvable in the future, is common and profitable.
However, according to another financial expert and lawyer Truong Thanh Duc itis not easy to sell consumer debts at full cost of principal, interest andpenalties because the sale seems less attractive than that of bad debts.Currently with bad debts with collateral, banks can only sell them at a priceequal to only 50-70 percent of book value.
Recently, commercial banks and financial companies have promoted the consumerlending segment to meet the urgent capital needs of people. In particular, theGovernment also encouraged the development of consumer lending in a move tofight against usury.
Though consumer lending has been thriving with increasing risk of bad debts,financial expert Dinh The Hien said there had been no legal debt trading marketin this segment. After the Government banned the debt collection service,financial companies and banks have to deal with bad debts from consumer loansby themselves.
According to experts, if VietinBank’s sale of consumer debts succeeds, it canstimulate other banks to follow suit, thereby creating a more bustling consumerloan trading market, contributing to handling bad debts from this segment./.
VNA
