NON-PERFORMING LOANS (NPL): LEGAL CONSEQUENCES & SOLUTIONS UNDER VIETNAM LAW 2025
HT Legal VN – Reputable Law Firm in Ho Chi Minh City & Hanoi
In the current volatile economy, late repayment or insolvency has become increasingly common. However, few borrowers realize that a delay of just 91 days or more will cause their loan to be classified as a non-performing loan (NPL). Beyond damaging credit ratings, NPLs may lead to asset seizure and serious legal risks. Understanding the law and responding promptly is the only way to safeguard your assets and financial future.
1. Definition of Non-Performing Loans (NPL)
Pursuant to Clause 5, Article 3 of Circular 31/2024/TT-NHNN (effective from July 1, 2024):
NPLs are loans classified under Groups 3, 4, and 5, including:
– Group 3 – Substandard debt: overdue from 91–180 days.
– Group 4 – Doubtful debt: overdue from 181–360 days.
– Group 5 – Potentially irrecoverable debt: overdue for more than 360 days.
Accordingly, once a debt is overdue by 91 days or more, it is officially recorded as an NPL.
2. Legal Consequences of Being Classified as an NPL
a. Recorded in CIC (Credit Information Center):
– Under Articles 35 and 36 of Circular 31/2024/TT-NHNN, information on NPLs must be reported to CIC and other licensed credit information agencies.
– This significantly restricts future borrowing capacity and may affect co-borrowers or relatives listed in the loan file.
b. High overdue interest rate:
– Clause 4, Article 13 of Circular 39/2016/TT-NHNN (as amended by Circular 06/2023/TT-NHNN) allows banks to impose overdue interest up to 150% of the in-term lending rate.
– This drastically increases borrowing costs.
c. Litigation and collateral enforcement risks:
– Banks are entitled to initiate lawsuits, request enforcement of judgments, or seize collateral under the loan agreement and applicable laws.
– In some cases, files may be transferred to investigative authorities if criminal signs are detected.
3. Key Updates under the 2025 Law
Pursuant to Article 198a of Law No. 96/2025/QH15 (effective from October 15, 2025):
Banks may seize collateral securing NPLs provided that:
– A valid agreement on collateral enforcement exists in the security contract.
– The security interest has been perfected and enforceable against third parties.
– The collateral is not under dispute, attachment, injunctive relief, or subject to enforcement suspension.
– Information disclosure obligations have been duly fulfilled.
Borrowers and mortgagors retain the right to:
– Monitor valuation and auction processes,
– Lodge complaints, or
– File lawsuits if violations are detected.
4. Bank NPL Handling Procedure in 2025
– Reminder & initial recovery: continuous reminders and collection notices are sent once loans become overdue.
– Negotiation & restructuring: banks may offer rescheduling, reduction of penalties, or loan term extension.
– Debt restructuring: adjustment of repayment schedules, debt freezing, or temporary relief measures.
– Collateral enforcement: if repayment remains impossible, banks may seize and auction collateral under the new 2025 Law.
5. HT Legal VN’s Expertise in NPL Resolution
With extensive practical experience, Lawyer Nguyen Thanh Trung and HT Legal VN have represented hundreds of clients in:
– Reviewing credit files and loan agreements to identify rights and obligations.
– Negotiating and working with banks to restructure debt or request interest reductions.
– Supervising valuation and auction processes to ensure transparency and prevent collusion.
– Representing clients in litigation and complaint procedures to protect lawful rights.
For foreign-invested enterprises (FDI), HT Legal VN provides comprehensive legal services on:
– Impact of NPLs on credit capacity, tender participation, and fundraising.
– Risk of investment registration certificates (IRC) being amended or revoked.
– Legal review of assets subject to foreign ownership restrictions.
6. Conclusion
NPLs are not only financial burdens but also significant legal risks. Proactive negotiation, thorough understanding of the law, and retaining specialized counsel are the only effective ways to protect assets and lawful rights.
HT Legal VN is committed to supporting clients comprehensively – from early debt difficulties, strategic legal advice, negotiation with banks, transparent supervision of collateral enforcement, to representation in complaints and litigation. Our expertise and practical experience help minimize damages and ensure optimal protection in every NPL-related situation.
Respecting due process means protecting yourself.”
We are pleased to welcome our valued clients at the following addresses:
Lawyer Nguyễn Thanh Trung or HT LEGAL VN LAW FIRM
Office 1: 12 Alley 602/37 Điện Biên Phủ Street, Thạnh Mỹ Tây Ward, Ho Chi Minh City
Office 2: 207B Nguyễn Phúc Chu Street, Tân Sơn Ward, Ho Chi
Minh City
Office 3: 5 Alley 252/115 Tây Sơn Street, Đống Đa Ward, Hanoi
Email: info@htlegalvn.com Hotline: 09 6161 4040 – 09 4517 4040