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Proposed Transfer of Special Lending Powers with 0% Interest to the State Bank

24 May, 2025

On May 20, the National Assembly heard a proposal and reviewed a report on the draft Law amending and supplementing a number of articles of the Law on Credit Institutions.

One of the key focuses was on legislating bad debt handling regulations and adjusting special lending authority to ensure the safety of the banking system.

**Bad debts are putting significant pressure on the banking system**

Presenting the proposal, Governor of the State Bank of Vietnam Nguyen Thi Hong stated that despite various control measures, bad debts in the credit system remain high and are on the rise. This situation exerts enormous pressure on banking activities, especially as 2025 has been designated as a year of “acceleration and breakthrough” to accomplish the socio-economic development goals of the term.

The government believes that legislating the regulations in Resolution 42/2017/QH14, which was a pilot solution for handling bad debts, is necessary to ensure the stability and harmony of the legal system. Additionally, legal adjustments will help credit institutions overcome obstacles in handling secured assets, improving people’s and businesses’ access to capital.

Governor Nguyen Thi Hong also mentioned that the draft law proposes transferring the authority to decide on special lending at a 0% interest rate without collateral from the Prime Minister to the State Bank.

Governor of the State Bank of Vietnam, Nguyen Thi Hong. Photo: Long Ho

According to Ms. Hong, the objective of this proposal is to streamline the process, ensuring a swift response in emergency situations, enhancing the State Bank’s initiative, and safeguarding the security of the credit institution system.

The above proposal is also considered suitable with the policy of decentralization and delegation of authority in administrative reform and has received unanimous support from many competent agencies. Deputy Prime Minister Ho Duc Phoc has directed the State Bank to research and propose this new regulation in the draft law.

Ms. Hong also stated that this amendment aims to implement the significant directives of the Party and the State in Resolutions No. 27, 66, and 68 of the Politburo on perfecting the institution, promoting the private economy, and building a rule-of-law state. One of the requirements is to “legislate what has been proven practical by reality.”

The government affirmed its viewpoint in constructing the law, ensuring that it institutionalizes the Party’s guidelines, guarantees constitutionality and legality, and is consistent with related legal documents. At the same time, it enhances feasibility and curbs negative aspects in policy implementation.

**Need to clarify criteria and conditions for special lending**

Presenting the verification report, Chairman of the Committee for Economy and Finance Phan Van Mai emphasized the necessity of issuing the law to ensure transparency, objectivity, constitutionality, and feasibility in the operations of credit institutions.

Regarding the legislation of the three policies in Resolution 42 on handling bad debts, Mr. Mai mentioned that the Committee for Economy and Finance agreed with the government’s explanation but also warned of the risk of credit institutions taking advantage of the right to seize secured assets to loosen lending conditions, leading to improper credit extensions.

Consequently, the verifying agency proposed clearly defining the conditions for seizing secured assets, the supportive role of the People’s Committees and the commune-level police in maintaining security and order during the seizure process, as well as the rights and legitimate interests of related parties.

Chairman of the Committee for Economy and Finance, Phan Van Mai. Photo: Long Ho

Regarding the mechanism of special lending at a 0% interest rate without collateral, the verifying agency agreed with the proposal to transfer the decision-making authority from the Prime Minister to the State Bank of Vietnam.

However, the Committee for Economy and Finance requested a clear definition of lending criteria, conditions, procedures, and control mechanisms to prevent risks and losses. Simultaneously, relevant regulations should be amended to align with the State Bank’s new authority.

On the matter of seizing assets used as collateral in enforcement cases, the verifying agency agreed on the need for specific regulations to avoid affecting the rights of third parties. The coordination mechanism between the enforcement agency and credit institutions also needs to be detailed by the government.

Regarding the return of secured assets that serve as evidence or objects of administrative violations, the verifying agency suggested a thorough review to avoid legal conflicts, especially in cases where the assets are of high value or related to multiple security obligations. If necessary, the government and the Supreme People’s Court should provide specific guidance.

Regarding the law-making process, Governor Nguyen Thi Hong of the State Bank of Vietnam stated that the bank had publicly posted the draft to gather opinions from relevant ministries, agencies, and organizations. After being appraised by the Ministry of Justice and approved by the Government regarding the contents to be absorbed, the draft law was submitted to the National Assembly for consideration at the 9th session.

According to the proposal, the draft law will continue to amend contents related to handling bad debts, secured assets, and emergency liquidity support mechanisms. The passage of this draft law is expected to create a stable legal framework, enhancing the resilience of the financial-banking system as the economy needs further impetus for sustainable growth.

REPORTERS

– 10:12 20/05/2025