Bad debt increases again, need for a stable legal corridor
The State Bank (SBV) is urgently completing the Law on the Law amending and supplementing a number of articles of the Law on Credit Institutions, expected to submit to the National Assembly at the 9th session. The bill was born in the context of a bad debt tend to increase, the economy needs to clear resources to achieve a growth target of 8% in 2025 and a series of important provisions from Resolution 42/2017/QH14 is being left open legal after the pilot effect.
According to the SBV, bad debt is increasing due to many reasons such as many difficulties in the domestic and world economies, slow recovery of the real estate, bond, and securities markets, while the debt trading market has not yet developed as expected. In particular, the expiration of Resolution 42 is creating a legal gap, affecting the bank's ability to handle collateral.
Dr. Nguyen Quoc Hung - Vice President and General Secretary of the Vietnam Banking Association - analyzed: "If bad debts cannot be handled, the credit system will be congested, businesses cannot borrow capital, and the economy will stagnate". He emphasized that the right to confiscate collateral is a natural right of the lending party, not a privilege and needs to be legalized for banks to be able to implement more effectively.
In Notice No. 61/TB-VPCP, the Standing Government also assigned the SBV to complete the legal framework for handling bad debts, of which the law of Resolution 42 is one of the key contents. The bill is currently proposing the lawization of three important groups of rights: the right to seize the collateral, the right to distrain the property in the execution of the sentence and return the collateral as evidence or material evidence in criminal cases, administrative violations.
Removing institutional bottlenecks, promoting credit
The draft law also proposes to give the SBV the right to decide on special lending at 0%/year interest rates, without the need for collateral, instead of having to ask for the Prime Minister's opinion as at present. According to the SBV, this helps shorten the process and respond promptly in case of needing to support weak credit institutions, avoiding spreading system risks.
Dr. Can Van Luc, member of the National Financial and Monetary Policy Advisory Council, commented: The failure to legalize some provisions in Resolution 42 such as the right to confiscate collateral has directly affected the ability to handle bad debts. This amendment to the law is necessary to fill legal gaps, ensuring consistency and enforcement effectivity".
The draft law is built according to the orientation of many high-level documents such as Conclusion 19-KL/TW, Conclusion 115-KL/TW, Resolution 27-NQ/TW, focusing on perfecting market economic institutions, improving resource management efficiency and innovating the thinking of law-making in the direction of removing - creating.
Focus on controlling power, ensuring balance of interests
Experts also believe that it is necessary to design a control mechanism to avoid abuse of power, ensuring the legitimate rights and interests of borrowers.
Lawyer Truong Thanh Duc - Director of ANVI Law Firm - assessed: The draft has a new point in allowing the confiscation of disputed assets - something that Resolution 42 previously did not stipulate.This is a strong step, which needs to be accompanied by responsibility for explaining and closely monitoring to avoid abuse.
In addition, the SBV also affirmed in its submission that the legalization of regulations must ensure a balance of interests between lenders and borrowers, avoiding asymmetry in credit relations, and at the same time, be consistent with international treaties to which Vietnam is a member.
2025 is identified by the Government as a key year to reach the socio-economic targets for the period 2021-2025. The National Assembly has passed Resolution 192/2025/QH15 requiring growth of 8% or more and assigning ministries and branches to urgently perfect institutions, credit mechanisms, taxes, and public investment.
In that context, amending the Law on Credit institutions to completely handle bad debts is considered an important foundation to increase capital supply capacity for the economy, reduce capital costs, and increase access to credit for businesses and people.
