The State Bank is drafting a circular on debt restructuring to enable credit institutions to provide more support to people and businesses after the recent storm and flood disaster. However, experts say that the nature of the debt is still there, and after 1-2 years it will become bad debt. Instead of extending or deferring, the State should have a debt cancellation mechanism for groups of customers who have suffered heavy losses.
Investing in 60 fish farms, each with about 500 fish in Cam Pha, Quang Ninh and 45 fish farms in Ben Giang, the loss of Ms. Ngo Thi Thuy's family, Thong Nhat 2 quarter, Tan An commune, Quang Yen town, Quang Ninh province, was up to 12 billion VND. After one night of storm No. 3, all that remained were a few small fish kept in the cages.
Ms. Thuy said that her family borrowed 4 billion VND from Agribank to invest in a fish raft. Now they just hope that the bank will postpone the debt, extend the debt, and give them a new loan so they can recover.
“If only the bank would trust us and lend us capital to quickly buy baby fish and release them in time, then in just two years, we could recover and have money to pay back the bank,” said Ms. Thuy. Many aquaculture households in Quang Yen town also fell into poverty when all their fishing boats and rafts were swept away by storm No. 3.
The State Bank's estimate shows that as of September 20, the entire system recorded 83,418 customers affected by storm No. 3 and floods; the total outstanding debt affected was about VND116 trillion, accounting for nearly 5% of the total outstanding debt of the economy.
Preliminary statistics from four commercial banks (BIDV, VCB, Agribank and Vietinbank) show that approximately 13,494 customers have been affected with an estimated outstanding debt of VND191,457 billion. It is expected that the number of customers and outstanding debt will increase in the coming days as credit institutions and State Bank branches update data.
According to Mr. Dao Minh Tu, Permanent Deputy Governor of the State Bank, two days after the storm, the State Bank organized a working group to survey the two most severely damaged provinces, Hai Phong City and Quang Ninh Province. Seafood farming businesses here suffered huge losses, even total losses. Some people invested tens of billions of VND but probably did not earn much. Stronger support policies are needed for cases with such severe damage.
Timely reduction of lending interest rates
Previously, the State Bank directed commercial banks to immediately reduce interest rates for customers affected by storm No. 3 based on the actual situation.
“Whenever a major force majeure event such as natural disasters or epidemics occurs, the banking industry is always ready to share difficulties with people and businesses,” said Mr. Nguyen Quoc Hung, Vice Chairman and General Secretary of the Vietnam Banks Association (VNBA).
Mr. Nguyen Quoc Hung added that immediately after the storm passed, following the direction of the State Bank, commercial banks quickly went with insurance companies to the affected localities to verify the damage and develop plans to support customers. From September 12 to now, most banks have immediately implemented solutions to waive and reduce interest rates for customers affected by storms and floods. Many banks reduced interest rates by 0.5-2% for individuals and business households borrowing capital that suffered damage due to storm No. 3; the period lasted from September to December 2024, with some banks extending it to January 2025.
Currently, the average lending interest rate of banks ranges from 6.3-7.8%. With the above reduction of 0.5-2% in lending interest rate, people and businesses affected by storm No. 3 will have the resources to restore production and business, thereby having the money to repay the bank.
However, Mr. Hung said that storm No. 3 and the post-storm circulation caused hundreds of thousands of billions of dong in the banking system to be slow to circulate and not create general added value. Therefore, although there was no heavy damage to the physical facilities, the banks themselves still faced some difficulties with liquidity.
Regarding this issue, Deputy Governor of the State Bank Dao Minh Tu said that the State Bank will have mechanisms to facilitate commercial banks to mobilize social resources; flexibly operate tools within the scope and authority of the State Bank to ensure liquidity for the system; support banks with sufficient resources to continue to provide new loans to key and focal areas and projects.
Allow debt forgiveness in special situations
Regarding the policy of restructuring debt repayment terms and maintaining the debt group for customers affected by storm No. 3, Mr. Nguyen Quoc Hung said that this is necessary, but in the long term, the Government and the State Bank need to study and design a debt suspension policy for customers who have suffered heavy losses due to natural disasters and epidemics.
According to the Vice President of VNBA, potential bad debts from restructured debt balances have not yet been clearly shown, so banks have faced many challenges regarding asset quality for many years.
After the storm, the asset quality of banks was also severely affected, even with loan insurance. Hotels, restaurants, cruise ships, boats, aquaculture and fishing equipment were all swept away by the storm and floods, and buffaloes and cows died.
Along with that, consumer credit is even more difficult. During the difficult Covid-19 period, recession, workers have had their income cut, no jobs... so borrowers who want to pay off their debts have nothing to pay.
“The high bad debt ratio makes consumer finance companies not dare to lend anymore,” Mr. Hung shared. At the same time, Mr. Hung said that the above factors combined with the increasingly difficult handling of bad debt make credit institutions face significant risks.
After the Covid-19 crisis, from 2020 until now, the risk provisions of Vietnamese commercial banks have continuously decreased; the risk buffer is still very thin. Without a substantial support mechanism from the Government, safety assurance indicators exceeding international practices will create many potential risks for banks. In fact, banks are also businesses that trade with money and the trust of depositors. The safety of banks is to stabilize the macro economy and national prestige.
Therefore, the Vice President of the Vietnam Banking Association proposed that in the event of this natural disaster, the Government should issue a mechanism allowing banks to postpone debts for customers who have suffered great losses and need a long time to recover, instead of restructuring the repayment period and keeping the debt group as before.
Lawyer Truong Thanh Duc, Director of ANVI Law Firm, said that debt forgiveness is a good solution in the current context, both helping banks have conditions to provide new loans to customers who suffered heavy losses due to storm No. 3 and helping reduce risks to the system.
According to experts, in fact, debts with restructured repayment terms from 2020 to present have increased non-performing assets, which means reduced profits and increased bad debt risks for banks.
Experts say that the nature of debt forgiveness is to allow businesses to temporarily stop paying principal or interest for a certain period of time. In the context of the pandemic and natural disasters over the past 5 years, banks and businesses need to forgive debts that are due and at risk of bad debt.
However, Mr. Duc said that there is currently a lack of legal basis for debt forgiveness. Laws, decrees and circulars do not stipulate, except for a few special cases such as public investment projects with debt forgiveness or some cases of policy loans, while consumer loans and production and business loans have not had the concept of debt forgiveness for the past 24-25 years.
Although debt forgiveness is considered a suitable solution in serious disaster situations, experts also recognize that this is not simple, even very difficult because it is related to the budget. Because to implement the debt forgiveness policy, the Government must have a budget source to pay debts on behalf of enterprises in case the debt forgiveness period expires and the enterprise is still unable to pay.
TB (according to VnEconomy)Source: https://baohaiduong.vn/buc-bach-nhu-cau-khoanh-no-trong-tinh-huong-dac-biet-393903.html
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