The State Bank of Viet Nam this week unveiled a draft circular regulating the operation of the Viet Nam Asset Management Company (VAMC) which is to become operational on July 9.—VNA/VNS Photo

HA Noi (Biz Hub)— The State Bank of Viet Nam this week unveiled a draft circular regulating the operation of the Viet Nam Asset Management Company (VAMC) which is to become operational on July 9.

According to the draft, lenders with non-performing loans (NPL) ratios of 3 per cent and above will be required to sell the loans to VAMC in either of two ways: at book value by issuing special bonds or at market value by using other sources.

VAMC will use the special bonds to buy only NPLs that are backed by collateral, 65 per cent of which must be real estate. The bad loans and collateral must be legitimate, not used to back other obligations of credit institutions and have full records and legal papers.

To have NPLs bought by the VAMC bonds, the balances or outstanding bad debts cannot be lower than VND3 billion for borrowing firms and VND1 billion for individual borrowers.

The Prime Minister will decide if VAMC buys bad loans that do not meet the conditions as recommended by the central bank.

To have bad loans purchased by VAMC at market value, which must be based on recoverability of the loans and collateral. The purchase price shall not be higher than the market value or the re-assessed value of the debts.

Borrowers must also have prospects of making repayments for the loans besides feasible production figures, business and repayment plans.

The draft circular also stipulates that credit institutions shall make specific provision for special bonds issued by VAMC.

Under the draft, VAMC can earn 2 per cent of total debts recovered and the income will be used to offset associated costs.

VAMC is expected to help the country to resolve roughly VND80-100 trillion of bad loans with a projected loan recovery rate of 20-40 per cent. — VNS