It takes 5 years from the full repayment of a customer’s debt for the bad debt history to be erased (Illustrative image) |
Ms. Le Thi Diep from Phu Nhuan District, Ho Chi Minh City, who had previously been in bad debt of over VND 1 billion, shared that she had just finished paying off this amount to the bank. However, the information about her debt still remains in the system of the Credit Information Center (CIC) under the State Bank, causing difficulties in her attempt to secure another bank loan for her business.
“How long will the bad debt history be retained, and what impact will it have if I apply for another bank loan in the future?” Ms. Diep wondered.
Regarding this issue, the leader of the Legal Affairs Department (State Bank) explained that bad debt refers to a loan that the borrower is unable to repay according to the initial agreement. This is considered negative information that can affect an individual’s financial situation and their ability to obtain loans in the future. Specifically, banks will reject loan applications from customers with bad debts recorded in the CIC system.
According to regulations, bad debt information on CIC is retained for a maximum of 5 years. This means that after 5 years from the full repayment of the debt by the customer, the bad debt history will be erased unless requested otherwise by the borrower or the lending bank.
“Therefore, after settling the debt, customers should request a confirmation letter from the bank stating that they no longer have any outstanding debt. This document will serve as proof to business partners and other banks that the customer does not have any bad debt, facilitating their future loan applications,” advised the leader of the Legal Affairs Department (State Bank).
Thy Tho
Overcoming Challenges in Dealing with Bad Debts
In the newly passed Revised Securities Law, securities companies (SCs) no longer have the privilege to hold collateral. Therefore, SCs need to recognize that debt collection is their responsibility, and they should be extremely strict in assessing borrowers, ensuring compliance with principles, procedures, and conditions before granting loans.
Declining profits at Bank increase in 2023
Throughout the year 2023, this bank achieved a pre-tax profit of over 928 billion VND, a decrease of 16.2% compared to 2022 and only 73% of the set plan was accomplished.
Debt Expert Worries About Bad Debts and their Management
Many experts believe that bad debts and the speed of bad debt processing will stagnate when the power to seize collateral from borrowers under Resolution 42 is no longer inherited in the amended Law on Credit Institutions. Therefore, banks will have to carefully consider before signing contracts with partners to avoid getting caught in a cycle of “lending, kneeling for debt” situation.
