B/ The problem of NPLs in Vietnamese bank:
I/The Definition of Non-Performing Loans (NPLs):
Based on IMF:
A loan is non performing when payments of interest and principal are past due by 90 days or more, or at least 90 days of interest payments have been capitalized, refinanced or delayed by agreement, or payments are less than 90 days overdue, but there are other good reasons to doubt that payments will be made in full.
Based on the SBVDecision 493/2005/QD-NHNN dated 22 Apr 2005:
NOL are prescribed to only debts cannot afford to pay both principal and interest or to fall into this situation. Within 3 months, if the debts that cannot afford to pay will be provided for bad debt. However, it also depends on the terms agreed upon by a loan agreement.
Based on this Decision the NOL is classified in to 4 groups as follows:
• NPLs Group 1 (Debts to which attention shall be paid) : includes debts overdue for less than 90 days and reschedule debts that are now no longer due according to reschedule terms. This group shall be provisioned at the rate of 5%
• NPLs Group 2 (Sub-standard): includes debts overdue between 90 and 180 days and reschedule debts overdue for less than 90 days according to reschedule terms. This group shall be provisioned at the rate of 20%
• NPLs Group 3 (doubtful debts): includes debts overdue for between 181 and 360 days and reschedule debts that are overdue for between 90 and 180 days according to the reschedule terms. This group is subject to a provisioned rate of 50%
• NPLs Group 4 (debts with potentially irrecoverable principal): includes debts overdue for more than 360 days, debts frozen pending the government’s handling, and reschedule debts that are now overdue for more than 180 days according to the rescheduled terms. This group shall be provisioned at 100%. With respect to debt frozen by the government, specific provisions shall