Bad debts can be understood as debts that are difficult to collect from the borrower when the payment due date under the committed Contract is reached. And to effectively manage these bad debt objects. The State Bank has classified bad debt groups in Circular 11/2021/TT-NHNN. In this article, TNTP will provide information on classification of bad debt groups to readers according to the content of Circular 11/2021/TT-NHNN.
In the content of Circular 11/2021/TT-NHNN, the State Bank has classified a total of debt groups into 5 groups, specifically:
Group 1 (Qualified Debt)
This is the debt group with the highest ability to repay, when the debts of these groups are not yet due. And the economic conditions of the debtors in this group are assessed as being able to fully recover both principal and interest.
In addition, in case the debtor pays less than 10 days past due, but is assessed as being able to fully collect both overdue interest and principal, it will also be classified as a qualified debt group.
Group 2 (Debts needing attention)
This is a group of debts that have been delayed in paying debts up to 90 days according to the content of the credit contract, or the debt of this group has been adjusted by a credit institution or bank branch – (which is the credit institution, the bank’s branch approves an extension of the repayment period for part/or all of the loan principal and interest when the debt is due but the debtor is unable to repay the loan on time).
In addition, some debts belong to the higher or lower debt group but fully meet the following conditions: The borrower has fully paid the overdue principal and interest and the principal and interest of the next repayment terms from the date of full payment of the overdue principal and interest; or have sufficient documents and records to prove that the debtor has paid the debt; or Credit institutions, bank branches, branches of foreign banks have sufficient information and documents to assess the customer’s ability to fully pay the remaining principal and interest on time.
Group 3 (Subprime debt)
This is a group of debts that have been late paying debts from 91 days to 180 days, and their debts have been adjusted by a credit institution or bank branch, but the debt that is extended for the first time is still outstanding in due date.
For this group, the debtor may be eligible for interest exemption or reduction due to the customer’s inability to pay interest in full as agreed, except for debts classified as high-risk debt in the following cases:
- The indicators of profitability, solvency, debt-to-capital ratio, cash flow, and debt repayment ability of customers decreased continuously after 03 times of continuous assessment and classification of debts;
- The debtor fails to provide sufficient, timely and truthful information at the request of the credit institution, bank branch or foreign bank branch to assess the debt repayment ability.
- Debts for which the act of granting credit is administratively sanctioned as prescribed by law.
Group 4 (Doubtful debt)
This is a group of debt with very low credibility when it is overdue from 181 days to 360 days. The debtors in this group have been adjusted by a credit institution or bank branch for the first time but continue to be overdue for up to 90 days for the first restructured repayment period. In addition, the debt group that continues to be adjusted by credit institutions and bank branches for the second time but has not yet been past due will also be classified into Group 4.
Some debts which must be collected according to inspection and examination conclusions but have not been collected by 60 days after the time limit for collection according to inspection and examination conclusions, will also be classified into Group 4.
In addition, the debt that must be collected under the decision on early debt collection of the credit institution, foreign bank branch due to the customer’s breach of the agreement with the credit institution, foreign bank branch has not yet been collected from 30 days to 60 days from the date of the decision to withdraw the offerings will be classified into group 4.
Group 5 (Debts likely to lose)
This is a group of debts with very low debt collection ability, which is assessed when the debtor cannot be classified into the remaining 04 groups when repeatedly fails to make payments, the characteristics of group 5 include:
- Debts that are overdue for more than 360 days;
- First-time rescheduled debt is overdue for 91 days or more according to the first rescheduled repayment term;
- Debts that have been rescheduled for the second time but continue to be overdue according to the second rescheduled repayment term;
- Debts that are rescheduled for the third time or more;
- Some debts which must be collected according to inspection and examination conclusions but have not been recovered for more than 60 days after the time limit for collection according to inspection and examination conclusions, will also be classified into Group 5;
- Debts to be collected under decisions on early debt recovery of credit institutions or foreign bank branches due to customers violating agreements with credit institutions or foreign bank branches that have not yet been collected over 60 days from the date of the decision to withdraw.
The above is a list of 5 basic debt groups classified according to the content of Circular 11/2021/TT-NHNN of the State Bank. Hope this information will be useful to you.