NPL bottlenecks call for institutional overhaul

Despite an increasingly complete legal framework, bad debt resolution in Vietnam remains hampered by weak enforcement, fragmented coordination, and an underdeveloped debt market.

- By Vy Vy

At a seminar on nonperforming loans (NPLs) held in Hanoi on April 15, Dr. Nguyen Quoc Hung, vice chairman and general secretary of the Vietnam Banks Association, revealed that the government is preparing to issue a new decree to replace legislation on the operations of Vietnam Asset Management Company (VAMC).

“Although the legal framework is relatively comprehensive, significant bottlenecks remain in practice. For instance, despite legally effective court judgments, enforcement remains limited. In addition, coordination among credit institutions, VAMC, other asset management companies, and enforcement agencies has yet to be truly effective,” Hung noted. “Procedures for transferring ownership of collateral, including seized or auctioned assets, continue to face numerous obstacles, particularly in the natural resources and environment sector.”

Hung cited preliminary data indicating that the on-balance-sheet NPL ratio and potential bad debts currently stand at over 2.8 per cent.

“If these resources are unlocked and channelled back into production and business activities, the economic benefits would be substantial. This would not only reduce costs for credit institutions but also restore capital circulation, support business growth, and stimulate economic expansion,” said Hung.

He called on relevant stakeholders to put forward recommendations to regulators and the government to further refine mechanisms and policies in line with practical realities.