Hanoi (VNS/VNA) - The settlement of bad debts willface many difficulties this year as there are no legal regulations related torepossessing collateral assets, industry insiders said.

According to Nguyen Quoc Hung, General Secretary of the VietnamBanking Association, it will be tough for credit institutions to handle andrecover bad debts, as Resolution 42/2017/NQ-QH14, which piloted handlingof bad debt of credit institutions and allowed the institutions torepossess collateral assets on bad debts, expired at the end of last year.

Hung is concerned as the expiry of the pilot resolution will leadto procrastination in paying debts among borrowers, because there are no legalregulations on recovering and handling bad debts.

“There will again be a situation where borrowers intentionally donot pay their debts, do not voluntarily hand over their collateral assets andcreate fake disputes that lead to difficulties in debt recovery,” Hung said,noting it will have a huge adverse impact on credit institutions.

Under the amended Law on Credit Institutions recently passed bythe National Assembly, credit institutions do not have the right to repossesscollateral.

Credit institutions are very worried about the issue because theywill have to handle bad debts on their own instead of having support fromGovernment agencies that were previously involved, such as the police andcourts. If borrowers intentionally do not pay their debts, credit institutionscannot handle the cases simply have to go to court, which will take a lot oftime, even up to 5-7 years, before the debt is recovered.

Under the context, Hung suggested credit institutions considertheir duty of debt recovery before lending; they need to be very strict toensure correct principles, procedures and lending conditions. Value and originof collateral assets must be appraised, verified, evaluated and closelymonitored.

It is necessary to be stricter in determining collateral assets inaccordance with the law to ensure there are no loopholes that borrowers cantake advantage of, Hung noted, believing that the measures will contribute toimproving the efficiency of bad debt handling at credit institutions.

In the long term, experts suggest that a new and more consistentlegal framework is needed to resolve bad debts. The Civil Law must be amendedto be more suitable, with clear responsibilities for those who have the abilityto repay debts but intentionally do not repay the debts./.