SBV extends debt restructuring policy

The State Bank of Vietnam (SBV), the central bank, has announced an extension of its debt restructuring policy, thus allowing commercial banks to maintain current debt classifications for struggling businesses for another six months, until the end of 2024.

The SBV said efforts are being made to facilitate credit flow and alleviate financial pressure on businesses and banks. The extension is provided in Circular 02/2023/TTNHNN, which permits banks to reschedule debt repayment and keep debt classifications unchanged for debtors in difficulty.

According to Deputy Governor Dao Minh Tu, this move comes due to concerns in the banking sector regarding the expiration on June 30 of the circular. The expiration raised fears of increased repayment pressure on businesses and difficulties in addressing non-performing loans.

“This policy supports both businesses and banks. However, if abused, it may eventually affect the national financial system, as cautioned by the global community. This is because this policy conceals some bad debts and allows them to fester, posing a long-term threat,” said Tu.

Under the circular, eligible borrowers can have their loan terms restructured while maintaining debt classifications. Local banks and foreign bank branches can assess customers’ financial situations for debt restructuring purposes.