Non-performing loan settlement in VBSP

According to the regime of resolving non-performing loans (NPLs) just enacted by the Prime Minister, instead of conducting 02 methods of NPL resolving such as exemption, deduction and write-off, VBSP shall apply 03 measures including: loan extension, frozen loan and write-off since 10th September 2010.

Applying this regime includes the VBSP and targeted clients:

1 - Poor households;

2 - Disadvantaged students;

3 - Job creation;

4 - Migrant workers abroad for definite term;

5 - Safe water supply and rural sanitation;

6 - Productive and business households in disadvantaged areas;

7 - Specially disadvantaged ethnic households;

8 - Housing loans under Decisions of the Prime Minister;

9 - Business traders in disadvantaged areas;

10 - Others mandated by the Government.  

NPL settlement due to objective reasons

The regime regulates NPL settlement of VBSP due to objective reasons. Regarding the NPLs due to subjective causes of individuals and organizations, the borrowers have to make compensation as stipulated by the Law.  

The resolution of NPLs is only carried out if 03 conditions are met:  

1 - Borrowers belong to the targeted groups and use the loans for stated purpose;

2 - Borrowers lose part or all their capitals and assets due to objective causes;

3 - Borrowers face financial difficulties, thus cannot repay debts for the bank.

The NPL resolution shall be  considered in each specific case and based on risk causes, risk level and repayment ability, ensure adequate legal documents, in order, objective and equal among borrowers.

Methods of NPL handling

Loan extension is a new method set forth in the regime of NPL handling in VBSP. In this case, the borrower will be extended loan maturity committed in the credit contracts and still take responsibility for interest repayment in the loan extension period. The borrowers are considered for loan extension if meeting the following conditions:

Borrowers face with risks due to reason 1 and 2 (stated on table);  damage level of capitals and assets under 40% of total funds for production and business plans.

The maximum term of loan extension is 12 months for short-term loans and half of repayment term for medium and long term loans.

Frozen loans is also a new method, accordingly, VBSP does not collect debts and calculate interests yet in the frozen loan period.

The borrowers are frozen loans  when the NPLs due to reason 1 and 2; damage level of capitals and assets from 40 - 100% of total funds for production and business plans. The frozen loan term is maximally 03 years (if damage level from 40 - 80%); 05 years (for 80 - 100%). In case the frozen loan term is expiry, the borrowers who still meet difficulties, unable to repay debts will be considered another extension with the maximum period not exceed the previous extension term according to the decision of authority level.

Written-off (including principals and interests) is that VBSP does not collect part or total principals and interests of active borrowers in the bank. There are two cases to be considered the write-off.

First, the borrowers face risks due to causes 1 & 2 and unable to repay debts even after out of the period of frozen loans. VBSP has responsibility to apply all methods of collecting debts.

Second, the borrowers face risks due to causes 3 & 4 and VBSP has responsibility to apply all methods of collecting debts.

The written-off amounts is that the borrowers have their obligation to repay for the bank after VBSP applied all methods of collecting debts.

OBJECTIVE CAUSES:

1. Natural calamity, wars, fire, firewood, epidemic diseases which damage directly capitals and assets of borrowers or projects.
2. Changes in government policies that directly affect business activities of borrowers such as the sources of inputs are no longer available, the output is prohibited etc.)
3. The borrowers is individuals, disadvantaged students or migrant workers abroad for definite term borrowing loans via households: lose legal capacity, get long-lasting illness, are mentally ill, in special difficulties, death, missing and have no assets or no inheritors or inheritors without repayment ability. 4. Borrowers being legal entities went bankruptcy or resolved and there are no assets to repay the debts to the Bank.