An employee of Bao Viet Bank with a client at its office in Hanoi (Photo: VNA)

Hanoi - Credit institutions and foreign bank branches are now allowed to restructure the repayment terms to support clients struggling with production and business expenses.

The State Bank of Vietnam (SBV) on April 23 issued Circular No. 02/2023/TT-NHNN stipulating the restructuring of repayment terms and keeping the debt group of credit institutions and foreign bank branches unchanged.

The rescheduling of debt repayment terms for customers is implemented from the effective date of this circular, starting from April 24 to the end of June 30, 2024.

Restructured debts include loans and financial leases.

SBV authorised credit institutions and foreign bank branches to take the initiative in reviewing and assessing the difficulties of borrowers to decide on the restructuring.

The rescheduled terms shall be decided by credit institutions but not exceed 12 months from the due date of the balances subject to the restructured repayment term.

The just-issued circular, along with other supportive policies, will contribute to removing difficulties for people and businesses, extending the lending period, repaying bank loans, and creating conditions for continued capital turnover and access to new loans.

In a meeting with representatives of the central bank at the end of March, business leaders all expressed their most pressing need for a suspension of debt payments.

Most export items saw a decline in the first quarter, which led to a slowdown in GDP growth.

Nguyen Ngoc Hoa, chairman of the Ho Chi Minh City Union of Business Association (HUBA), said: "Since the beginning of the year, the city's main export industries have all dropped sharply by 20-40 per cent. Although businesses have limited expansion, they still need capital to endure this tough time."

Dinh Trong Thinh, senior lecturer at the Academy of Finance, said that the circular helps banks have a legal basis to be able to extend, postpone, and charge off debt groups for businesses, thereby creating favourable conditions for businesses to access credit.

However, other financial experts said the rescheduling term of 12 months is short. Therefore, the period should be extended to support inpiduals and enterprises in overcoming challenges due to the slowdown of the global economy.

In the middle of last year, a debt restructuring policy was also issued to support businesses affected by the COVID-19 pandemic.

Statistics showed that in the previous debt restructuring for clients affected by the pandemic, nearly 1.1 million debtors had their repayment terms restructured, keeping the debt group with an accumulated value of more than 722 trillion VND (30.7 billion USD).

Recently, Prime Minister Pham Minh Chinh, in a meeting with the SBV, requested the central bank to amend bond regulations and reschedule debts for businesses.

The PM asked for the completion of the draft circular amending Circular 16/2021 on credit institutions buying and selling corporate bonds in the direction of allowing banks to immediately buy corporate bonds.

According to regulations applied in 2021, banks can only buy unlisted corporate bonds 12 months after these bonds are sold and can only repurchase the same type of bonds that were sold by credit institutions before.

The SBV's recent amendment is to allow credit institutions to buy back unlisted or unregistered bonds on UPCoM that banks sold before the end of 2023.