Information at At the workshop on the current status of consumer lending activities of credit institutions and the issue of debt collection organized by the Vietnam Banking Association on November 16 in Hanoi, Mr. Nguyen Quoc Hung, Vice Chairman and General Secretary of the Vietnam Banking Association, said that recently, credit institutions have actively implemented many measures to improve their operations and increase credit balances as approved by the State Bank...
Overview of the workshop
However, currently, the domestic economic situation is facing many difficulties, the global economy is evolving in a complex and unpredictable manner, leading to many challenges for lending activities in general, especially consumer lending in particular.
According to the State Bank of Vietnam’s Deputy Governor Dao Minh Tu, before the Covid-19 pandemic, consumer lending grew very rapidly, meeting people’s practical needs. However, after the pandemic, consumer credit decreased sharply.
Since the beginning of the year, due to the negative impact of the global economic downturn and domestic economic difficulties, banking operations have faced many difficulties and challenges. As of the end of September, credit growth to the economy was low (6.92%), of which consumer lending growth increased by only 1.53% compared to the end of 2022.
The reasons for low credit growth, as pointed out by Mr. Tu, are that the demand and capital absorption capacity of the economy are still low, while input costs are high, the output market and business orders decline, leading to a decrease in investment demand, production and business. In addition, people's income has decreased, consumer demand has tightened, leading to a sharp decrease in consumer loan demand, difficulty in debt repayment, and increased bad debt.
Some credit institutions are forced to cut down on their consumer loan portfolios.
Mr. Hung emphasized that as of the end of September, the bad debt ratio in consumer credit throughout the system tended to increase (about 3.7% of total outstanding consumer credit; while from 2018 to 2022, this bad debt ratio was only around 2%). Even the bad debt ratio of financial companies is at risk of increasing by over 15%; many companies are in a difficult situation, suffering losses due to having to set aside high provisions for bad debt risks.
The rate of bad debt in consumer loans is increasing, in addition to objective factors and general difficulties, according to Mr. Hung, there are also subjective factors, very dangerous, for which there are no sanctions.
That is, customers intentionally do not pay their debts, the previous person advises the next person not to pay their debts, even when company officials come to collect debts or remind them to pay, they oppose, denounce, and slander the officials as using aggressive measures to collect debts to the government.
The General Secretary of the Vietnam Banking Association also mentioned the situation. Groups of people "explode" debt on social networks, causing many consequences for credit institutions but not being handled... "All of the above makes debt collection activities, especially consumer credit debt of credit institutions, encounter many difficulties. Some credit institutions are forced to proactively cut down on their consumer loan portfolios to avoid bad debt from continuing to arise," said Mr. Hung.
Mr. Nguyen Dinh Duc, Deputy General Director of HD SAISON Finance Company Limited, proposed that there should be specific measures to call for and raise awareness and attitudes of borrowers; at the same time, strictly handle subjects participating in debt "skipping" groups, as well as those who guide and encourage debt "skipping" behavior, intentionally not paying debts.
At the same time, it is necessary to apply deterrent sanctions to individuals who intentionally violate rules and ethics in the consumer finance sector in particular and the personal credit sector in general. Without specific action, debt "explosion" may continue to occur, which may affect bad debt not only in the last months of 2023 but also many years later.
Deputy Governor Dao Minh Tu emphasized that the State Bank is very concerned about how to reduce illegal business types that are flourishing and overwhelming official financial companies; even having a legal corridor, sanctions on debt collection, sanctions against unofficial and disguised financial companies...
By the end of September, the entire system had 84 credit institutions implementing consumer credit activities, including 15 consumer finance companies.
Total outstanding loans to the economy are about 12,749,000 billion VND; of which consumer credit of the whole system is about 2,703,000 billion VND, accounting for 21.2% of total outstanding loans to the economy (of which, outstanding consumer loans of financial companies are provisionally estimated at 134,279 billion VND, accounting for about 5% of outstanding consumer loans of the whole system).
Therefore, this can be considered an effective capital channel for people in society.
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