Cash transactions at a HD Bank branch on Tran Hung Dao Street. The State Bank of Viet Nam has asked credit institutions to sell their non-performing loans to national debt dealer Viet Nam Asset Management Company to meet regulated deadlines. — VNA/VNS Photo Tran Viet

HA NOI (Biz Hub)— Credit institutions have been forced to sell their non-performing loans (NPLs) to national debt dealer Viet Nam Asset Management Company (VAMC) to meet regulated deadlines.

Online newspaper Vneconomy.vn cited a State Bank of Viet Nam's (SBV's) instruction sent to credit institutions this week, which directs credit institutions to sell at least 75 per cent of the NPLs they had registered for sale to VAMC by June 30.

The deadline for selling all NPLs is September 30.

Previously, the sale of NPLs to the VAMC was not compulsory.

According to credit institutions, the move is aimed at implementing a SBV directive issued earlier this year for handling the NPLs of credit institutions.

As per the SBV Governor's directive, credit institutions and VAMC have been given a strict schedule for resolving their bad debts as SBV wants to ensure that the banking sector is able to meet SBV's target for bringing down NPLs to below 3 per cent by the end of 2015, from the 4.7 per cent recorded at the end of the third quarter of last year.

As June 30 approaches, credit institutions will have to hastily sell their NPLs to VAMC in a bid to meet the deadline.

Resolving bad debts is among the key tasks of the banking industry this year. The Government is also expected to adopt a plan that will enable VAMC to trade debts through market mechanisms this year.

It has also asked the company to enhance its financial capacity and tighten links with credit institutions for recovering and restructuring debts, and create advantageous conditions for investors in debt and mortgage transactions.

SBV had recently allowed VAMC to issue special bonds, worth up to VND80 trillion (US$3.76 billion), to acquire bad loans from credit institutions this year.

VAMC plans to buy NPLs worth VND100 trillion ($4.76 billion), or 2.5 per cent of banks' total outstanding loans, this year.

Last year, VAMC had bought NPLs worth about VND96 trillion ($4.57 billion), raising the total bad debts it had purchased from 38 credit institutions to VND135 trillion ($6.43 billion), or 3.4 per cent of the total outstanding loans. — VNS