A charge-off policy is urgently needed

Typhoon No. 3 devastated the northern Vietnam regions. According to government estimates, the damage inflicted by Storm No. 3 totaled VND 81.50 trillion, resulting in a 0.15% loss in overall GDP growth in 2024.

Severe damage

The majority of companies and residents that experienced damage during Storm No. 3 are commercial bank clients. According to Ms. Ha Thu Giang, Director of the Credit Department for Economic Sectors at the State Bank of Vietnam (SBV), as of September 25, the bank system's outstanding debts affected by Storm No. 3 in 26 provinces and cities totaled VND 65 trillion, affecting over 94,000 clients.

To support people and businesses overcoming difficulties due to the impact of Storm No. 3 in restoring and promoting production and business, the Governor of the State Bank of Vietnam has issued Directive No. 04/CT-NHNN requiring credit institutions to promptly implement solutions to assist customers affected by the storm, such as restructuring loan repayment terms, waiving and reducing interest rates; maintaining debt classification, rescheduling debts, and providing new loans to eligible customers as per current regulations...

Acknowledging that the relationship between people, businesses, and banks is symbiotic - when customers are strong, banks are healthy - banks are urgently deploying a variety of solutions to help them. For example, in Hai Phong, one of the areas hardest hit by Storm No. 3, credit institutions have restructured repayment terms for 146 customers with total outstanding loans of VND 113 billion; granted interest cuts to 294 customers with total outstanding loans of VND 2.841 trillion; and provided new loans to 7,184 customers with a total loan of VND 823 billion.

Loans should be soon restructured

However, in accordance with Decree 55/2015/ND-CP (amended and supplemented by Decree 116/2018/ND-CP) on credit policies for agricultural and rural development, loan repayment terms are being restructured while debt classification is maintained for customers affected by Storm No. 3.

While many enterprises in other industries were also severely damaged by Storm No. 3, they are not eligible for assistance under this program. As a result, the State Bank of Vietnam is quickly writing a new Circular governing the adjustment of loan repayment arrangements for clients affected by Storm No. 3.

Recognizing the banking system's support and sharing, many experts believe that, while restructuring repayment terms and maintaining the debt classification affected by Storm No. 3 is critical, it is insufficient to assist businesses in recovering their production and business.

"This policy has only helped people and businesses avoid being classified as higher debt groups, but the pressure to repay interest remains; meanwhile, many people and businesses have yet to resume production and business after Typhoon No. 3, so they have no cash flow to repay principals and interests to banks," an analyst stated.

According to this researcher, firms urgently want new financial flow to restart production and business. However, securing bank loans is difficult since they still have outstanding loans from prior ones, and collateral is no longer accessible because it has been mortgaged or destroyed by Storm No. 3. As a result, many people and enterprises urgently require charged-off debts, interest exemptions, and fresh loans to resume production and company operations.

Understanding this, Ms. Hà Thu Giang stated that, in addition to urgently drafting a Circular regulating the restructuring of repayment terms for customers affected by Storm No. 3, the State Bank of Vietnam will work with the Ministry of Planning and Investment to report to the Prime Minister on the charge-off decision, with a maximum charge-off period of two years. The state budget will reimburse the interest payments made throughout the charge-off period.