CaliToday (06/9/2025): In a move lauded for its humanitarian approach, the State Bank of Vietnam (SBV) is proposing a landmark policy that would prohibit credit institutions from seizing the sole residence of a borrower who has defaulted on their loans. This significant proposal aims to protect the basic right to shelter for citizens, ensuring that individuals and families facing financial hardship do not lose their only home.
The proposal is a key feature in the ongoing discussions surrounding amendments to Vietnam's Law on Credit Institutions. It addresses a critical social issue where borrowers with "bad debts"—loans that are overdue and unlikely to be repaid—face the possibility of foreclosure and eviction from their only place of residence.
Under current regulations, banks and credit institutions have the legal right to seize collateralized assets, including real estate, to recover losses from non-performing loans. While this is a standard practice in the banking sector globally, the SBV's new proposal recognizes the severe social consequences that can arise when this practice leaves a family without a home.
The central bank's initiative is being framed as a policy rooted in compassion, designed to provide a fundamental safety net for the most vulnerable. The core principle of the proposal is that while lenders must have mechanisms to recover debts, this should not come at the cost of a citizen's minimum right to housing.
"This is a humane policy that reflects a commitment to social welfare," commented a local legal expert. "It strikes a balance between the legitimate commercial interests of banks and the fundamental need to ensure that people have a place to live. Losing one's only home can create a devastating spiral of poverty and social instability, and this policy seeks to prevent that."
The proposal is expected to generate significant discussion among both financial institutions and the public. Banks may express concerns about potential increases in lending risk and the challenges of recovering bad debts if their primary collateral—the borrower's home—is protected from seizure. They may argue that such a regulation could lead to tighter lending criteria for individuals who can only offer their sole residence as collateral.
However, supporters of the policy argue that it will encourage more responsible lending practices, forcing banks to conduct more thorough risk assessments before issuing loans. Furthermore, it aligns with a broader government focus on ensuring social security and improving the quality of life for its citizens.
The State Bank of Vietnam will continue to gather feedback on the proposal before it is finalized and submitted for legislative approval. The outcome of this debate will be closely watched, as it could set a new precedent for how bad debts are managed in Vietnam, placing a stronger emphasis on social responsibility within the financial sector.
