Bad debt is under control
In 2023, the business activities of Agribank Nghe An branch will face mixed advantages and difficulties, some of which are beyond forecast and different from previous years: after the Covid-19 pandemic, the economy will open up, the Government will direct the acceleration of public investment disbursement; the real estate and stock markets will be quiet, so capital mobilization will be more favorable. In addition, the impact of the Russia-Ukraine conflict, the consequences of the Covid-19 pandemic, the negative impact of the world economy and the domestic economy, will cause people and businesses to reduce the scale of investment, business and consumption, leading to a sharp decline in credit demand, credit growth will face many difficulties...
Data compiled from the State Bank of Vietnam, Nghe An branch, shows that as of December 31, 2023, total mobilized capital reached VND232,344 billion, up 16.3% compared to the beginning of the year. Meanwhile, lending was lower, with total outstanding loans of VND286,222 billion, up 10% compared to the beginning of the year.
The economic situation is difficult, bad debt in the entire banking industry is generally increasing. Along with the trend of increasing bad debt nationwide, bad debt in Nghe An accounts for 1.9% of total outstanding debt, an increase of 2.8 times compared to 2022 (in 2022 bad debt accounts for 0.55% of total outstanding debt). However, with many solutions proposed, bad debt of credit institutions in the province is lower than the bad debt of the entire banking industry nationwide at 4.95%.
Bad debt is mainly concentrated in loans for wholesale, retail, repair of cars, motorbikes, motorbikes and other motor vehicles (73%); other service activities (11.5%); arts, entertainment (4.5%); activities of hiring jobs in families, production of material products and services for self-consumption of households (4.3%)...
A representative of the State Bank shared that, in the context of such general difficulties, the policy of debt deferral and retention of debt groups for customers has been applied by the State Bank since the beginning of 2020. The regulations issued are mainly aimed at providing banks with a mechanism to delay the recognition and provisioning of provisions, as well as creating conditions to extend more time for real estate investors to resolve debt obligations that are about to mature.
In Nghe An, following the direction of the Government and the State Bank, many banks have implemented loan packages with interest rate support, and many banks have controlled bad debt well. For example, at Agribank Nam Nghe An, by the end of 2023, the total bad debt was 30.6 billion VND, down 10.7 billion VND compared to the beginning of the year; the bad debt ratio was 0.24%/plan assigned under 0.8%/total outstanding debt. Of which, outstanding debt of group 5 accounted for 92.2%/total outstanding debt. As a result, outstanding debt of the whole system increased by 7.4% but Agribank Nam Nghe An branch increased by 11.2%...
Director of Agribank Nam Nghe An, Mr. Truong Quoc Bao said: To control credit quality, bad debt within the allowable scope, and recover debt after handling beyond the plan assigned by the head office, we synchronously deploy solutions: Control bad debt, debt with potential risks for units/departments through assigning plans for bad debt ratio, group 2 debt ratio and group 5 debt ratio. Proactively review and inventory bad debt, debt with potential risks, develop specific debt collection plans for each loan, assign responsibility to the head of the unit and related officers in handling and recovering bad debt. Actively deploy many effective measures to recover debt and handle risks such as seizing collateral for handling, exempting interest, filing lawsuits... so we have successfully completed the assigned plan targets. Strictly implement regulations on managing problematic credit loans; Develop plans, roadmaps and flexibly apply measures to handle group 2 debt right from the time of transferring...
Improve credit quality
According to the assessment, the credit acceleration in the last month of 2023 will help dilute bad debt, bringing the bad debt ratio of banks to a lower level. However, this ratio may increase again in the first half of 2024 when credit growth slows down and macroeconomic factors show no clear signs of improvement...
In Directive No. 01 on organizing the implementation of key tasks of the banking sector in 2024, the Governor of the State Bank requested credit institutions to resolutely and effectively implement the Project "Restructuring the system of credit institutions associated with handling bad debts in the period 2021-2025", contributing to the development of a system of credit institutions operating healthily, with quality and efficiency.
Ms. Nguyen Thi Thu Thu - Director of the State Bank of Vietnam, Nghe An branch, said: To ensure the goals set by the Government and the National Assembly for the banking industry in 2024, the Governor of the State Bank of Vietnam issued Directive No. 01/CT-NHNN on organizing the implementation of key tasks of the banking industry in 2024, in which, one of the issues that need to be focused on is directing credit institutions to promote the handling and recovery of bad debts; improve credit quality, prevent and limit new bad debts arising through solutions that will be applied and deployed in the area in the coming time.
Implementing the directive, in 2024, the industry will strengthen micro-safety supervision; closely monitor credit quality, credit granting activities for potentially risky areas, credit granting within the same banking ecosystem, credit granting of large value to customers outside the area, provision of services related to corporate bonds, insurance agency activities... to detect signs of potential risks, violations of the law; proactively implement appropriate solutions to ensure the safety of banking operations when detecting unusual fluctuations. Direct, monitor, and closely supervise the implementation of the restructuring plan of credit institutions in the area, strictly handle violations.
Direct credit institutions in the area to seriously implement the conclusions, recommendations and warnings of the State Bank through inspection, examination and supervision; rectify and handle, propose timely handling of existing problems and violations; at the same time, monitor, urge and check the implementation results of credit institutions...
During the inspection, examination and supervision process, proactively direct credit institutions to promote and effectively implement the work of handling and recovering bad debts, and strengthen discipline in handling and recovering debts. Resolutely implement solutions to improve credit quality, prevent and minimize bad debts; classify debts, set up and use risk reserves in accordance with the provisions of law. Actively coordinate with local authorities and competent State agencies, especially the Public Security, People's Courts, and Enforcement Agencies at all levels in the process of handling secured assets to recover debts in order to ensure maximum recovery of debt value, minimize losses for credit institutions, and ensure the legitimate interests of the State and shareholders. Closely coordinate with the One-Member Limited Liability Company specializing in asset management of Vietnamese credit institutions (VAMC) in buying, selling and handling bad debts.
“In addition, we also coordinate with agencies such as the Provincial Party Committee's Internal Affairs Committee, the Provincial Police, the Provincial People's Procuracy, and the Provincial Civil Judgment Enforcement Office to speed up the process of handling bad debts. At the same time, we direct people's credit funds to advise the district-level People's Committees to establish a Steering Committee for handling bad debts and a team to assist in handling bad debts in districts and communes to coordinate with people's credit funds to handle bad debts effectively" - Director of the State Bank of Vietnam, Nghe An branch shared.
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