(English – Tiếng Anh)

1. Circular 39/2016/TT-NHNN on Lending activities by credit institutions and foreign bank branches

CIRCULAR 39/2016/TT-NHNN

December 30, 2016

Prescribing the provision of loans by credit institutions and foreign bank branches to clients

Pursuant to the June 16, 2010 Law on the State Bank of Vietnam;

Pursuant to the June 16, 2010 Law on Credit Institutions;

Pursuant to the Government’s Decree No. 156/2013/ND-CP of November 11, 2013, defining the functions, tasks, powers and organizational structure of the State Bank of Vietnam;

At the proposal of the Director of the Monetary Policy Department;

The Governor of the State Bank of Vietnam promulgates the Circular prescribing the provision of loans by credit institutions and foreign bank branches to clients.

Chapter I. GENERAL PROVISIONS

Article 1. Scope of regulation and subjects of application

1. This Circular prescribes the provision of loans by credit institutions and foreign bank branches (below referred to as credit institutions) to clients.

2. This Circular does not regulate the provision of loans among credit institutions.

Article 2. Interpretation of terms

In this Circular, the terms below are construed as follows:

1. Provision of loans means a form of credit extension by which a credit institution gives or commits to give a client a sum of money for use for a specific purpose in a certain period of time as agreed upon on the principle of repayment of both principal and interest.

2. Lending credit institution means a credit institution established and operating under the Law on Credit Institutions, including:

a/ Commercial bank;

b/ Cooperative bank;

c/ Non-bank credit institution;

d/ Micro financial institution;

dd/ People’s credit fund;

e/ Foreign bank branch.

3. Client borrowing loans from a credit institution (below referred to as client) means a legal person or an individual, being:

a/ A legal person established and operating in Vietnam, a legal person established overseas and lawfully operating in Vietnam;

b/ An individual bearing the Vietnamese citizenship, an individual bearing foreign citizenship.

4. Loan for daily-life needs means the provision of a loan by a credit institution to an individual client to pay for his/her own and his/her family living expenses.

5. Loan for business or other activities (below referred to as business activities) means the provision of a loan by a credit institution to a client being a legal person or an individual to meet fund demand not prescribed in Clause 4 of this Article, including fund demand of such legal person or individual or of the business household or private enterprise owned by such individual.

6. Fund use plan means a set of information on the use of funds by a client, containing the following information:

a/ The total fund needed, details of types of sources of the total fund needed (including loans needed to be borrowed from credit institutions); fund use purpose; and the period of fund use;

b/ The client’s sources for debt repayment;

c/ Business plan or project (not required for loans to cover daily-life expenses).

7. Financial capability means the fund and asset capability and other lawful financial resources of a client.

8. Loan term means a period of time counted from the day following the day on which a credit institution disburses a loan to its client to the point of time the latter has to fully repay the loan principal and interest as agreed upon between the credit institution and client. In case the last day of the loan term is a holiday or weekend, it will be the following working day. If the loan term is shorter than an entire day, provisions of the Civil Code on the starting point of time of a termshall be applied.

9. Debt repayment term means periods of time constituting the agreed loan term at the end of each period a client shall partially or fully repay the loan principal and/or interest to the credit institution.

10. Debt rescheduling means the adjustment of the debt repayment term or extension of a debt approved by a credit institution as follows:

a/ Adjustment of the debt repayment term means the extension of a debt repayment term period (including no change in the number of agreed debt repayment terms) approved by the credit institution, without changing the loan term;

b/ Extension of debt means the extension of the repayment of the loan principal and/or interest for a period exceeding the agreed loan term, which is approved by the credit institution.

11. Overdue loan principal balance comprises:

a/ The overdue loan principal balance converted into an overdue debt under Article 20 of this Circular;

b/ The loan principal balance that the client fails to pay ahead of schedule when the credit institution terminates the loan provision and recovers the debt ahead of schedule under Clause 1, Article 21 of this Circular.

Article 3. Credit institutions’ autonomy

1. Credit institutions have autonomy in the provision of loans and take accountability for their lending decisions. No organizations or individuals may illegally intervene in the provision of loans by credit institutions.

2. Credit institutions may refuse clients’ requests that are incompliant with provisions of this Circular and loan agreements.

Article 4. Principles of provision and borrowing of loans

1. The provision of loans by a credit institution to clients shall be conducted under the agreements between the credit institution and clients and in conformity with this Circular and relevant laws, including the law on environmental protection.

2. Clients borrowing loans from a credit institution shall ensure proper use of loans and repayment of the loan principal and interest on schedule as agreed with the credit institution.

Article 5. Application of relevant legal documents

1. The provision of loans by credit institutions must comply with the Law on Credit Institutions, this Circular and other relevant laws.

2. Specific loan provision activities prescribed in specific documents of the Government, Prime Minister and State Bank of Vietnam must comply with such specific documents. In case a specific document of the Government, Prime Minister or State Bank of Vietnam prescribes the application of this Circular or some details relating to loan provision are not prescribed in such document, this Circular shall be applied. Specific loan provision activities include:

a/ Providing syndicated loans;

b/ Providing loans to clients for offshore investment;

c/ Providing loans to clients to conduct business activities under socio-economic policies and programs of the Government and Prime Minister;

d/ Providing foreign currency loans to resident clients;

dd/ Providing and recovering loans overseas to and from non-resident clients;

e/ Providing loans by people’s credit funds or micro financial institutions;

g/ Providing consumer loans by finance companies;

h/ Providing other specific loans as prescribed in specific documents of the Government, Prime Minister or State Bank of Vietnam.

Article 6. Use of language

1. A loan agreement shall be made in Vietnamese or both Vietnamese and another foreign language.

2. For other documents concerning loan provision that are presented in a foreign language, if competent agencies request their Vietnamese translations, the translations must be certified by a competent person of the credit institution or be notarized or authenticated.

Article 7. Conditions for borrowing loans

A credit institution shall consider and decide to provide a loan to the client when the latter fully satisfies the following conditions:

1. Being a legal person who has the civil legal capacity as prescribed by law. A client is an individual who reaches full 18 years of age or older and has full civil act capacity as prescribed by law or who is between full 15 years of age and under 18 years of age and has not lost his/her civil act capacity or his/her civil act capacity is not restricted in accordance with law.

2. Having demand to borrow a loan for use for a lawful purpose.

3. Having a feasible loan use plan.

4. Having financial capability to repay debt.

5. A client who wishes to borrow a loan from a credit institution at the interest rate specified in Clause 2, Article 13 of this Circular, must be assessed by the credit institution as having a transparent and sound financial status.

Article 8. Demands ineligible for borrowing loans

A credit institution may not provide loans to meet the following demands:

1. Carrying out investment or business activities in sectors and trades in which such activities are banned by law.

2. Paying expenses for or financing transactions or acts which are banned by law.

3. Buying and using goods and services of sectors and trades in which investment and business activities are banned by law.

4. Buying gold bullions.

5. Repaying loan debts owed to the lending credit institution, excluding loans used for paying the loan interest arising in the course of work construction whereby the loan interest is included in the construction cost estimate approved by a competent authority in accordance with law.

6. Repaying loans provided by another credit institution and repaying foreign loans, excluding loans used for repaying debts ahead of schedule when fully satisfying the following conditions:

a/ Being used for business activities;

b/ The loan term does not exceed the remaining time of the existing loan’s term;

c/ Having its term not yet rescheduled.

Article 9. Dossiers of application for loans

A client, who has a demand for a loan, shall send the credit institution documents proving the eligibility for such loan as prescribed in Article 7 of this Circular and other documents required by the credit institution.

Article 10. Types of loans

A credit institution shall consider and decide to provide clients the following types of loans:

1. Short-term loans, which have the maximum term of 1 (one) year.

2. Medium-term loans, which have a term of between more than 1 (one) year and 5 (five) years.

3. Long-term loans, which have a term of more than 5 (five) years.

Article 11. Currencies of loan and repayment

1. Credit institutions and clients may agree on loans to be provided in Vietnam dong or a foreign currency in accordance with this Circular and relevant laws.

2. The currency used for debt repayment is the one in which the loan is provided.

Article 12. Loan limit

A credit institution may agree with its clients on the loan limits based on the clients’ fund use plans and financial capability and its credit extension limits applicable to clients and available funding sources,.

Article 13. Loan interest rate

1. A credit institution and clients may agree on the loan interest rates according to the market’s fund supply and demand and the clients’ loan demand and credibility, except for the cases in which the maximum loan interest rate is set by the State Bank of Vietnam in Clause 2 of this Article.

2. A credit institution and clients may agree on the short-term loan interest rate in Vietnam dong which must not exceed the maximum interest rate decided by the Governor of the State Bank of Vietnam for each period so as to satisfy loan demands for:

a/ Serving agriculture and rural development under the Government’s regulations on credit policies for agriculture and rural development;

b/ Implementing export business plans under the Commercial Law and its guiding documents;

c/ Serving business activities of small- and medium-sized enterprises under the Government’s regulations on support for small- and medium-sized enterprises;

d/ Developing supporting industries under the Government’s regulations on  development of supporting industries;

dd/ Serving business operations of hi-tech enterprises under the Law on High Technologies and its guiding documents.

3. An agreement on the loan interest rate must specify the interest rate and method of calculating the interest on the loan. In case the interest rate is not expressed in %/year and/or the interest is not calculated based on the actual loan balance and the period to maintain such loan balance, the loan agreement must state the interest rate converted into %/year (on the basis of 365 days per year) and the interest calculated on the actual loan balance and the period to maintain such balance.

4. A client that fails to partially or fully repay the agreed loan principal and/or interest on the due date shall repay the loan interest as follows:

a/ Accrued interest on the principal at the agreed interest rate corresponding to the loan term at the end of which repayment has not been made;

b/ If the client fails to pay the interest on schedule as stated at Point a of this Clause, he/she/it shall pay a late payment interest at the interest rate agreed upon between the credit institution and client not exceeding 10%/year on the late paid interestforthe late payment period;

c/ In case a loan debt is converted into an overdue debt, the client shall pay accrued interest on the overdue loan principal balance for the late payment period at an interest rate not exceeding 150% of the interest rate applied to the undue loan from the time of conversion into an overdue debt.

5. In case the adjustable interest rate is applied to a loan, the credit institution and client shall agree on principles and factors for determining the adjusted interest rate and time for adjustment. If the use of factors for determining the adjusted interest results in different interest rates, the credit institution shall apply the lowest one.

Article 14. Charges for loan provision

A credit institution and clients shall agree on the collection of charges for loan provision, including:

1. Charge for ahead of schedule repayment of debts in case a client repays debts prior to the due date.

2. Charge for the line of provisional credit.

3. Charge for arrangement of syndicated loans.

4. Charge for making a commitment to withdraw a loan from the effective date of the loan agreement to the date of the initial disbursement of the loan.

5. Other charges in relation to the loan provision specified in relevant legal documents.

Article 15. Loan security

1. Credit institutions and clients shall agree on whether or not to take loan security measures. An agreement on loan security measures between a credit institution and a client must comply with the law on security measures and relevant laws.

2. Credit institutions shall decide and take responsibility for unsecured loans.

3. Clients and securing parties shall cooperate with credit institutions in handling security assets when there arise grounds for such handling under loan agreements, loan security contracts and laws.

Article 16. Information provision

1. A credit institution shall provide clients with all information before the establishment of a loan agreement, including the loan interest rate; principles and factors and the point of time for determining the loan interest rate in case  the adjustable interest rate is applied; the interest rate on the overdue loan principal balance; the interest rate applicable to late paid interest; method of calculating the interest on the loan; types of charges and charge rates applicable to the loan; and criteria for identifying clients to be eligible for loans with the interest rate mentioned in Clause 2, Article 13 of this Circular.

2. Clients shall provide information to the credit institution and take responsibility before law for the accuracy, truthfulness and adequacy of documents sent to the credit institution:

a/ The documents prescribed in Article 9 of this Circular;

b/ Reports on loan use and proving loans to be used for proper purposes as stated in the loan agreements;

c/ Documents proving the application of loan security measures.

Article 17. Appraisal and lending decisions

1. Credit institutions shall appraise clients’ capability to satisfy the conditions for taking out loans under Article 7 of this Circular to make lending decisions. Credit institutions may use their internal credit rating system together with information from the National Credit Information Center of Vietnam and other information channels for the appraisal.

2.  Credit institutions shall consider and approve loan provision based on the principle of separation of appraisal and decision-making responsibilities.

3. In case of refusal to provide a loan, a credit institution shall notify the reason therefor to the client at the latter’s request.

Article 18. Repayment of loan principal and interest

1. A credit institution and clients may agree on the repayment term of the loan principal and interest as follows:

a/ Repaying the loan principal and interest in different terms;

b/ Repaying the loan principal and interest in the same term.

2. A credit institution and clients may agree on the latter’s debt repayment prior to the due date.

3. In case a client cannot partially or fully repay the loan principal and/or interest on the due date, the credit institution shall consider approving the debt rescheduling under Article 19 or the conversion into an overdue debt under Article 20 of this Circular. The credit institution and client shall agree on the calculation of the payable interest in conformity with Clause 4, Article 13 of this Circular.

4. A credit institution and clients may agree on the order for recovery of the loan principal and interest. For overdue debts, the credit institution shall recover the loan principal first and the loan interest later.

Article 19. Debt rescheduling

A credit institution may consider and decide to reschedule a client’s debt at the latter’s request and on the basis of the credit institution’s financial capability and result of evaluation of the client’s debt repayment capability as follows:

1. If the client fails to make due payment of his/her loan principal and/or interest and is evaluated by the credit institution as having capability of paying off the loan principal and/or interest according to the to-be-adjusted debt payment term, the credit institution may consider adjusting the payment term of his/her loan principal and/or interest suitable to the client’s sources for debt payment without changing the loan term.

2. If the client fails to pay off his/her loan principal and/or interest within the agreed loan term and is evaluated by the credit institution as having capability of paying off loan principal and/or interest within a certain period following the loan term, the credit institution may consider an extension suitable to the client’s sources for debt payment.

3. Debt rescheduling shall be decided before or within 10 (ten) days from the agreed date of debt payment.

Article 20. Overdue debts

A credit institution may convert the loan principal balance into an overdue debt when the client fails to pay the debt according to the agreed loan term and the credit institution refuses to approve debt rescheduling, and notify the client thereof. Such a notification must at least specify the overdue loan principal balance, the time of conversion into an overdue debt and the interest rate applied to the overdue loan principal balance.

Article 21. Termination of loan provision, settlement of debts and exemption from and reduction of loan interest and charges

1. A credit institution may terminate the provision of a loan and recover debts ahead of schedule as agreed upon when detecting that the client has provided false information or breached the loan agreement and/or loan security contract. When terminating the loan provision or recovering debts ahead of schedule according to the loan agreement, the credit institution shall notify the client thereof. Such a notification must at least specify the time of termination of the loan provision and recovery of debts ahead of schedule, the loan principal balance subject to recovery; the time for repayment of such the loan principal balance, the time when such balance will be converted into an overdue debt and the interest rate applied to such loan principal balance.

2. In case a client fails to pay a due debt, a credit institution may apply debt recovery methods according to the loan agreement, security contract and relevant laws. If the application of debt recovery measures is not sufficient for the client to fully repay the debt to the credit institution, the client shall continue fully paying the loan principal and interest to the credit institution.

3. In case the court decides to initiate bankruptcy procedures or declare bankruptcy for the client or securing party, the credit institution’s recovery of debt owed by the client or securing party must comply with the law on bankruptcy.

4. A credit institution may decide to exempt or reduce loan interest and charges for a client in accordance with its internal regulations.

Article 22. Internal regulations

1. Pursuant to the Law on Credit Institutions, this Circular and relevant laws, a credit institution shall issue internal regulations on loan provision and management of loans in conformity with the characteristics of its business activities (below referred to as internal regulations on loan provision).

2. A credit institution’s internal regulations on loan provision shall be applied to its entire system and must contain the following details:

a/ Conditions for provision of loans, fund demands ineligible for loans; modes of loan provision; loan interest rates and loan interest calculation methods; dossiers for loan provision and documents to be sent by clients to the credit institution in conformity with characteristics and types of loans and potential clients; debt recovery; the conditions, process and procedures for debt rescheduling; the conversion into overdue debts;

b/ The process of  appraisal, approval and making of lending decisions specifying the maximum time limit for appraisal and making a lending decision; decentralization, authorization and responsibilities of each person and section in the appraisal, approval and making a lending decision and other contents of the lending process;

c/ The process of inspection and supervision of clients in the borrowing and use of loans and repayment of debts; decentralization, authorization and responsibilities of each person and section in the examination and supervision of clients in the borrowing and use of loans and repayment of debts;

d/ The application of loan security measures, appraisal of assets used as loan security, the management, supervision and monitoring of assets used as loan security suitable to loan security measures, characteristics of assets used as loan security and clients;

dd/ Termination of loan provision, settlement of debts and exemption from and reduction of loan interests and charges;

e/ The identification of risks that may arise during the lending process; the process of monitoring, evaluation and control of risks, risk handling plans;

g/ The control of provision of loans to be used for repaying debts owed to the credit institution and repaying foreign debts in order to prevent false reporting on credit quality. The control of loan provision by the mode of rollover and revolving loans in order to manage clients’ cash flow and ensure the full recovery of loan principal and interest by the agreed due date, correctly reflecting credit quality.

3. Within 10 (ten) working days from after issuing new or revised internal regulations on loan provision, micro financial institutions and people’s credit funds shall send them to the State Bank’s provincial-level branches; other credit institutions shall send their internal regulations to the State Bank of Vietnam (the Banking Inspection and Supervision Agency).

Article 23. Loan agreements

1. A loan agreement shall be made in writing and must contain at least the following information:

a/ Name, address and enterprise identification number of the lending credit institution; name, address and serial number of the client’s identity card or passport or enterprise identification number;

b/ Loan amount; the line of credit for loans provided within lines of credit; line of provisional credit for loans provided within lines of provisional credit; overdraft limit for loans provided within overdraft limits on the payment account;

c/ Loan use purposes;

d/ Currency used for loan extension and debt repayment;

dd/ Method of lending;

e/ Loan term; the period to maintain the line of credit for loans provided within lines of credit; the effective period of the line of provisional credit for loans provided within lines of provisional credit; or the period to maintain the overdraft limit for loans provided within overdraft limits on the payment account;

g/ The agreed loan interest rate and the converted interest rate in %/year based on the actual loan balance and the period to maintain the actual loan balance under Clause 3, Article 13 of this Circular; principles of and factors for determining the loan interest rate and the time for determining the loan interest rate in case the adjustable interest rate is applied; the interest rate applied to the overdue loan principal balance; the interest rate applied to late-paid interest; types of charges for loans and the applied charge rates;

h/ Loan disbursement and payment instruments used to disburse loans;

i/ The repayment of loan principal and interest and the order for recovery of loan principal and interest; payment of loans ahead of schedule;

k/ Debt rescheduling; conversion of the loan principal balance into an overdue debt as the client fails to repay on the agreed due date and the credit institution refuses debt rescheduling; the form and contents of the notification on the conversion into overdue debts according to Article 20 of this Circular;

l/ Clients’ responsibilities in cooperating with credit institutions and providing documents relating to loans for the latter to appraise and make  lending decisions; examining and supervising clients in using loans and repaying debts;

m/ Cases of termination of loan provision; debt recovery ahead of schedule; conversion of the loan principal balance into an overdue debt as the client fails to repay it ahead of schedule when the credit institution terminates loan provision and recover the debt ahead of schedule; the form and contents of the notification on the termination of loan provision and recovery of debts ahead of schedule according to Clause 1, Article 21 of this Circular;

n/ Settlement of loan debts; sanctioning of violations and compensation for damage; rights and responsibilities of all parties;

o/ The effect of the loan agreement.

2. In addition to the contents prescribed in Clause 1 of this Article, the parties may agree on other details in conformity with this Circular and relevant laws.

3. The loan agreement prescribed in Clauses 1 and 2 of this Article shall be made in the form of either specific loan agreement or framework agreement and specific loan agreement.

4. In case of using a model contract or general transaction conditions in its loan agreements, a credit institution shall:

a/ Publicly post the model contract and general transaction conditions on provision of loans at its head office and on its website;

b/ Provide sufficient information on the model contract and general transaction conditions to clients prior to the conclusion of loan agreements and obtain clients’ confirmation that it has been provided with sufficient information.

Article 24. Examination of loan use

1. Clients shall use loans and repay debts as agreed; report and provide documents proving their loan use as requested by the credit institution.

2. A credit institution may examine and supervise clients in using loans and repaying debts according to the internal process referred to at Point c, Clause 2, Article 22 of this Circular.

Article 25. Sanctioning of violations and compensation for damage

1. A credit institution and a client shall agree on sanctioning of violations and compensation for damage in accordance with law in case either of them fails to comply with the loan agreements, unless otherwise prescribed in Clause 4, Article 13 of this Circular.

2. A credit institution and a client may agree on the violator to be subject to sanctions without having to pay compensation for damage or to be subject to sanctions and payment of compensation for damage. In case a credit institution and a client agree on sanctioning of violations but not both sanctioning and payment of compensation for damage, the violator shall be sanctioned only.

Article 26. Other provisions

Upon the provision of loans, a credit institution shall:

1. Comply with provisions on cases ineligible for loans, loan restrictions and loan limits prescribed in Articles 126, 127 and 128 of the Law on Credit Institutions and with regulations of the State Bank of Vietnam on limits and prudential ratios in operations of credit institutions.

2. Use payment instruments to disburse loans under the regulations of the State Bank of Vietnam on the use of payment instruments to disburse loans of credit institutions to clients.

3. Classify assets and make deduction to set up and use risk provisions in lending activities under the regulations of the State Bank of Vietnam on the classification of assets, the level and method of deduction for setting up risk provisions and the use of risk provisions in operations of credit institutions.

4. Perform accounting and bookkeeping and make statistical reports on lending activities prescribed by the current law on the accounting and bookkeeping and statistical reporting regime for credit institutions.

Chapter II. SPECIFIC PROVISIONS

Section 1. LOAN PROVISION FOR BUSINESS ACTIVITIES

Article 27. Methods of lending

A credit institution and a client shall agree on the application of the following methods of lending:

1. Single loan: For each single loan, the credit institution and client shall perform procedures for loan provision and sign a loan agreement.

2. Syndicated loan: Two or more credit institutions jointly provide a loan to the client to implement a loan plan or project.

3. Loan for crop seasonal interval: The credit institution shall provide a loan to the client to cultivate and tend plants or raise livestock on a seasonal basis in the rotating production cycle within a year or to grow plants of which roots are retained after harvesting and industrial crops which are annually harvested. Accordingly, the credit institution and the client may agree on the continued use of the loan principal balance of the previous production cycle for the next one for no more than 2 consecutive production cycles.

4. Loan provided within a line of credit: The credit institution shall determine and agree with the client on the maximum loan balance to be maintained within a certain period. With this line of credit, the credit institution shall provide single loans. At least once a year, the credit institution shall re-determine the maximum loan balance and the period of maintenance thereof.

5. Loan provided within a line of provisional credit: The credit institution shall pledge to guarantee loan provision to the client within the agreed line of provisional credit. The credit institution and client shall agree on the validity period of the line of provisional credit which must not exceed 1 (one) year.

6. Loan provided within an overdraft limit on the payment account: The credit institution may permit the client’s spending in excess of the amount in the latter’s payment account within a maximum overdraft limit to make payments on such account. The maximum overdraft limit may be maintained for a maximum period of 1 (one) year.

7. Revolving loan: The credit institution and client may agree on loan provision for business cycles lasting for no more than 1 (one) month whereby the client may use the loan principal balance of the previous business circle for the next one with a loan term not exceeding 3 (three) months.

8. Rollover loan: The credit institution and client may agree on the application of short-term loans provided that:

a/ On the due date of debt repayment, the client may repay debts or extend the period of partial or full repayment of the loan principal balance of the loan for a specific period of time;

b/ The total loan term must not exceed 12 months from the date of initial disbursement or one business cycle;

c/ When the loan application is considered, the client must not have any non-performing loans at the credit institution;

d/ Throughout the rollover loan term, the client having non-performing loans at the credit institution may not extend the agreed debt repayment period.

9. Other methods of lending may be combined with the methods of lending referred in Clauses 1, 2, 3, 4, 5, 6, 7 and 8 of this Article suitable to credit institutions’ business activities and characteristics of loans.

Article 28. Loan term

1. A credit institution and client shall agree on the loan term based on the business cycle, the deadline for debt recovery, the debt repayment capability of the client, and sources for loan provision and the remaining operation period of the credit institution,.

2. For a client being a legal person established and operating in Vietnam or established overseas and operating lawfully in Vietnam, the loan term must not exceed the remaining period of the client’s lawful operation; for an individual client bearing foreign citizenship and residing in Vietnam, the loan term must not exceed the remaining period of his/her permitted residence in Vietnam.

Article 29. Archive of dossiers of loan provision

1. A credit institution shall make a dossier of loan provision, which must comprise:

a/ The dossier of application for a loan;

b/ The loan agreement;

c/ Reports on the actual financial status sent by the client to the credit institution during the loan term;

d/ Dossiers relating to loan security;

dd/ The lending decision signed by a competent person; in case of a collective decision, a minutes stating the adoption of the decision is required;

e/ Documents arising in the course of using the loan which relate to the loan agreement as guided by the credit institution.

2. Credit institutions shall archive dossiers of loan provision; the archival period of dossiers must comply with law.

Section 2. LOAN PROVISION TO MEET DAILY-LIFE NEEDS

Article 30. Methods of lending

A credit institution may agree with its clients on the application of the following lending methods:

1. The lending methods specified in Clauses 1, 4 and 6, Article 27 of this Circular.

2. Other lending methods to be combined with those referred in Clause 1 of this Article in conformity with the credit institution’s business conditions and characteristics of loans.

Article 31. Loan term

1. A credit institution and a client may agree on the term of a loan based on the client’s debt repayment capability and the credit institution’s sources for loan provision and remaining operation period.

2. For an individual bearing foreign citizenship and residing in Vietnam, the loan term must not exceed the remaining period of his/her permitted residence in Vietnam.

Article 32. Archive of dossiers of loan provision

1. A credit institution shall make a dossier of loan provision, comprising:

a/ A dossier of application for a loan;

b/ The loan agreement;

c/ Reports on the client’s income during the loan term under the guidance of the credit institution;

d/ Dossiers relating to loan security;

dd/ The decision on loan provision signed by a competent person; in case of a collective decision, a minutes stating the adoption of the decision is required;

e/ Documents arising in the course of using the loan which relate to the loan agreement under the credit institution’s guidance.

2. A credit institution shall archive dossiers of loan provision; the archival period must comply with law.

Chapter III. ORGANIZATION OF IMPLEMENTATION

Article 33. Effect

1. This Circular takes effect on March 15, 2017.

2. From the effective date of this Circular, the following documents of the Governor of the State Bank of Vietnam cease to be effective:

a/ Decision No. 1627/2001/QD-NHNN of December 31, 2001, promulgating the Regulation on provision of loans by credit institutions to clients;

b/ Decision No. 28/2002/QD-NHNN of January 11, 2002, amending Article 2 of Decision No. 1627/2001/QD-NHNN of December 31, 2001 of the Governor of the State Bank of Vietnam, promulgating the Regulation on provision of loans by credit institutions to clients;

c/ Decision No. 127/2005/QD-NHNN of February 3, 2005, amending and supplementing a number of articles of the Regulation on provision of loans by credit institutions to clients promulgated together with Decision No. 1627/2001/QD-NHNN of December 31, 2001, of the Governor of the State Bank of Vietnam;

d/ Decision No. 783/2005/QD-NHNN of May 31, 2005, amending and supplementing Clause 6, Article 1 of Decision No. 127/2005/QD-NHNN of February 3, 2005, of the Governor of the State Bank of Vietnam, amending and supplementing a number of articles of the Regulation on provision of loans by credit institutions to clients promulgated together with Decision No. 1627/2001/QD-NHNN of December 31, 2001, of the Governor of the State Bank of Vietnam;

dd/ Circular No. 12/2010/TT-NHNN of April 14, 2010, guiding the provision of loans in Vietnam dong to clients at agreed interest rates by credit institutions;

e/ Circular No. 05/2011/TT-NHNN of March 10, 2011, prescribing the collection of loan charges from clients by credit institutions and foreign bank branches;

g/ Circular No. 33/2011/TT-NHNN of October 8, 2011, amending and supplementing a number of articles of Circular No. 13/2010/TT-NHNN of May 20, 2010, prescribing prudential ratios in operations of credit institutions and the Regulation on provision of loans by credit institutions to clients promulgated together Decision No. 1627/2001/QD-NHNN of December 31, 2001, of the Governor of the State Bank of Vietnam;

h/ The State Bank of Vietnam’s Circular No. 08/2014/TT-NHNN of March 17, 2014, prescribing interest rates for short-term loans in Vietnam dong provided by credit institutions to clients in need of funds in some economic sectors.

Article 34. Transitional provisions

For a credit contract signed before the effective date of this Circular:

1. The credit institution and its client may continue performing the credit contract that was signed in accordance with regulations effective at the time of its signing or the agreement on amendments and supplements to the credit contract in conformity with this Circular.

2. In case of applying the method of provision of the loan within a line of credit, a line of provisional credit or an overdraft limit on the payment account, if the contract does not specify the period to maintain the line of credit or overdraft limit on the payment account or the validity period of the line of provisional credit, the credit institution and client may continue performing the credit contract that was signed in accordance with regulations effective at the time of its signing, provided the period to maintain the line of credit or overdraft limit on the payment account or the validity period of the line of provisional credit must not exceed 1 (one) year counting from the effective date of this Circular.

Article 35. Organization of implementation

1. Credit institutions shall, in pursuance to this Circular, elaborate internal regulations on provision of loans to clients.

2. The Chief of the Office, the Director of the Monetary Policy Department, heads of units of the State Bank of Vietnam, directors of provincial-level braches of the State Bank of Vietnam, chairpersons of the Boards of Directors, chairpersons of the Members’ Councils and directors-general (directors) of credit institutions shall implement this Circular.

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2. Circular 06/2023/TT-NHNN (Amending Circular 39/2016/TT-NHNN)

CIRCULAR 06/2023/TT-NHNN

June 28, 2023

Amending and supplementing a number of articles of Circular No. 39/2016/TT-NHNN of December 30, 2016, of the Governor of the State Bank of Vietnam, providing for the provision of loans by credit institutions and foreign bank branches to clients

Pursuant to the June 16, 2010 Law on the State Bank of Vietnam;

Pursuant to the June 16, 2010 Law on Credit Institutions, and the November 20, 2017 Law Amending and Supplementing a Number of Articles of the Law on Credit Institutions;

Pursuant to the Government’s Decree No. 102/2022/ND-CP of December 12, 2022, defining the functions, tasks, powers and organizational structure of the State Bank of Vietnam;

At the proposal of the Director of the Monetary Policy Department;

The Governor of the State Bank of Vietnam promulgates the Circular amending and supplementing a number of articles of Circular No. 39/2016/TT-NHNN of December 30, 2016, of the Governor of the State Bank of Vietnam, providing for the provision of loans by credit institutions and foreign bank branches to clients (below referred to as Circular No. 39/2016/TT-NHNN).

Article 1. To amend and supplement a number of articles of Circular No. 39/2016/TT-NHNN

1. To amend and supplement Point c, Clause 6 of, and add Clause 12 to, Article 2 as follows:

a/ To amend and supplement Point c, Clause 6 as follows:

“c/ Business plans/projects, or plans/projects serving borrowers’ consumption needs, such as purchase, construction or renovation of houses; or acquisition of land use rights for construction of houses.”.

b/ To add Clause 12 as follows:

“12. Provision of loans for offsetting financial assets means the provision of a loan by a credit institution to a client to offset expenses paid by the client’s own funds or by loans borrowed from individuals or organizations (other than credit institutions) for the client to implement a business plan/project or a plan/project serving the client’s consumption needs.”.

2. To amend and supplement Article 8 as follows:

“Article 8. Loan demands ineligible to be satisfied

A credit institution may not provide loans to clients for:

1. Carrying out business investment activities in sectors and trades in which business investment is banned under the Law on Investment.

2. Paying expenses for or financing business investment activities in sectors and trades in which business investment is banned under the Law on Investment and other transactions or acts banned by law.

3. Buying and using goods and services in sectors and trades in which business investment is banned under the Law on Investment.

4. Buying gold bullions.

5. Repaying the amounts of credit extended by the lending credit institutions, except cases in which loans are provided to clients for paying the loan interests arising in the course of construction of works and the loan interests are included in the total construction investment amounts approved by competent authorities in accordance with law.

6. Repaying foreign loans (excluding foreign loans provided in the form of goods purchase/sale on deferred payment), and the amounts of credit extended by other credit institutions, except cases in which a new loan is provided to a client for premature repayment of the existing loan when the following conditions are fully satisfied:

a/ The term of the new loan does not exceed the remaining term of the existing loan;

b/ The existing loan has not yet been rescheduled.

7. Depositing money.

8. Making payment for capital contribution, purchasing or acquiring capital contributions of limited liability companies or partnerships; or contributing capital, purchasing or acquiring shares of joint-stock companies not yet listed on the securities market or not yet registered for trading on the Upcom trading system.

9. Making payment for capital contribution under a capital contribution contract, investment cooperation contract or business cooperation contract for the implementation of an investment project ineligible for being put into commercial operation in accordance with law at the time the credit institution decides on loan provision.

10. Offsetting financial assets, except cases in which the following conditions are fully satisfied:

a/ The client has used its own funds to pay expenses for implementation of a business project and such expenses incur for a period of less than 12 months counted by the time the credit institution decides on loan provision;

b/ Expenses for the implementation of a business project that have been paid by the client’s own funds come from the loans provided by the credit institution under the fund use plan submitted to the credit institution when the client applies for medium- or long-term loans to implement such business project.”.

3. To amend and supplement Clause 2, Article 11 as follows:

“2. The currency used for debt repayment is the currency in which the loan is provided. In case of debt repayment in another currency, the agreement between the credit institution and the client shall be implemented in accordance with relevant regulations.”.

4. To amend and supplement Clause 2, Article 13 as follows:

“2. In case a client is evaluated by a credit institution as having a transparent and sound financial status, the credit institution and the client may agree on the interest rate of the short-term loan in Vietnam dong, which must not exceed the maximum interest rate decided by the Governor of the State Bank of Vietnam in each period, so as to provide loans for:

a/ Serving agricultural and rural development under the Government’s regulations on credit policies for agricultural and rural development;

b/ Implementing export trading plans under the Commercial Law and guiding documents;

c/ Serving business activities of small- and medium-sized enterprises in accordance with the Law on Support for Small- and Medium-sized Enterprises and the Government’s regulations on support for small- and medium-sized enterprises;

d/ Developing supporting industries under the Government’s regulations on development of supporting industries;

dd/ Serving business activities of enterprises applying high technologies on the Prime Minister-approved List of high technologies prioritized for development investment and hi-tech enterprises defined under the Law on High Technologies and guiding documents.”.

5. To amend and supplement Clause 4, Article 18 as follows:

“4. A credit institution and a client may agree on the sequence of recovery of the loan principal and interest. For an overdue debt, the credit institution shall recover the loan principal first and the loan interest later. For a loan with one or several overdue repayment term(s), the credit institution shall recover it according to the following sequence: overdue loan principal, interest on unpaid overdue loan principal, due principal, and interest on the loan principal not paid by the due date.”.

6. To amend and supplement Clause 1, and Points a, b, c, e and g, Clause 2, Article 22 as follows:

a/ To amend and supplement Clause 1 as follows:

“1. Pursuant to the Law on Credit Institutions, this Circular and relevant regulations, a credit institution shall issue its internal regulations on loan provision, including regulations on online lending (if any), and management of loans in conformity with the characteristics of its business activities (below referred to as internal regulations on loan provision).”.

b/ To amend and supplement Point a, Clause 2 as follows:

“a/ Conditions for provision of loans, including specific criteria for determining whether the borrower’s demand for loans is for use for lawful purposes; and whether the borrower has a feasible loan use plan and financial capacity to repay debts; loan demands ineligible to be satisfied; mode of loan provision; loan interest rate and interest calculation method; criteria for determining whether a client has a transparent and sound financial status to be eligible to borrow loans at the interest rates specified in Clause 2, Article 13 of this Circular; dossier for loan borrowing and documents and data to be sent by the client to the credit institution in conformity with characteristics and types of loans and category of clients; debt recovery; conditions, process and procedures for debt rescheduling; conversion of loans into overdue debts; conditions for provision of loans without applying security interests and competence to decide on provision of loans without applying security interests.”.

c/ To amend and supplement Point b, Clause 2 as follows:

b/ The process of appraisal and approval of clients’ dossiers for loan borrowing and decision on, loan provision, specifying:

(i) Maximum time limits for appraisal of a client’s dossier for loan borrowing and decision on loan provision; decentralization, authorization and responsibilities of each person and division in the appraisal and approval of a client’s dossier for loan borrowing and decision on loan provision, including regulations on online lending specified in Article 32dd of this Circular (if any); and other jobs involved in the process of appraisal and approval of a client’s dossier for loan borrowing and decision on loan provision;

(ii) Cases in which loans are provided for making payment for capital contributions under capital contribution contracts, investment cooperation contracts or business cooperation contracts for implementation of projects;

(iii) In case of provision of loans for payment to secure obligation performance, it is required to take measures for freezing the amounts of loans disbursed by the lending credit institution in accordance with law and loan agreements of the parties until the security obligation is terminated.”.

d/ To amend and supplement Point c, Clause 2 as follows:

“c/ The process of inspection and supervision of clients in the borrowing and use of loans and repayment of debts, specifying:

 (i) Decentralization, authorization and responsibilities of each person and division in the inspection and supervision of clients in the borrowing and use of loans and repayment of debts;

(ii) In case of provision of loans for making payment for capital contributions under capital contribution contracts, investment cooperation contracts or business cooperation contracts for implementation of projects, it is required to take measures for inspecting, supervising and evaluating clients’ financial status, funding sources for debt repayment, ensuring the full recovery of loan principal and interest by the due date as agreed upon, and controlling the use of loans;

(iii) In case of provision of loans for making payment to secure obligation performance, ensuring the recovery of loans in case the parties fail to properly fulfill the secured obligations as agreed upon;”.

dd/ To amend and supplement Point e, Clause 2 as follows:

“e/ The identification of risks that are likely to arise during the lending process; the process of monitoring, evaluation and control of risks; plans for risk handling during the lending process (including online lending);”.

e/ To amend and supplement Point g, Clause 2 as follows:

“g/ The control of provision of loans to be used for repaying debts owed to the credit institution and repaying foreign debts in order to prevent false reporting on credit quality; the control of loan provision by the mode of rollover and revolving loans in order to manage clients’ cash flow and ensure the full recovery of loan principal and interest by the due date as agreed upon, correctly reflecting credit quality; the control of provision of loans for securities trading investment; provision of loans to purchase and trade in real estate; provision of loans for investment projects in the form of public-private partnership; provision of consumer loans with great value as evaluated by credit institutions; and online lending.”.

 7. To amend and supplement Point b, Clause 4, Article 23 as follows:

“b/ Provide sufficient information on the model contract and general transaction conditions to clients prior to the conclusion of loan agreements and obtain clients’ confirmation that they has been provided with sufficient information by credit institutions.”.

8. To amend and supplement Clause 2, Article 24 as follows:

“2. A credit institution has the right and obligation to inspect and supervise clients in using loans and repaying debts in accordance with law and the internal process specified at Point c, Clause 2, Article 22 of this Circular.”.

9. To amend and supplement Clause 2 of, and add Clause 5 to, Article 26 as follows:

a/ To amend and supplement Clause 2 as follows:

“2. Use payment instruments to disburse loans under the State Bank of Vietnam’s regulations on the modes to disburse loans of credit institutions to clients.”.

b/ To add Clause 5 as follows:

“5. In case of provision of loans for payment to secure obligation performance, freeze the amounts of loans disbursed by the lending credit institution in accordance with law and loan agreements of the parties until the security obligation is terminated.”.

10. To amend and supplement Clauses 1, 4 and 5, Article 27 as follows:

a/ To amend and supplement Clause 1 as follows:

“Provision of a single loan: For each time of loan provision, the credit institution and the client shall perform procedures for provision of loans to the client and sign a loan agreement.”.

b/ To amend and supplement Clause 4 as follows:

“4. “Provision of loans based on line of credit: The credit institution shall determine, and agree with the client on, the maximum line of credit to be maintained within a certain period. At least once a year, the credit institution shall re-determine the maximum line of credit and the period of maintenance thereof.”.

c/ To amend and supplement Clause 5 as follows:

“5. Provision of loans based on standby line of credit: The credit institution shall commit to provide loans to the client within the agreed standby line of credit (beyond the agreed line of credit). The credit institution and the client shall agree on the validity period of the standby line of credit which must not exceed 1 (one) year.”.

11. To add Section 3 to Chapter II as follows:

“Section 3

ONLINE LENDING

Article 32a. Principles of online lending

1. Credit institutions shall provide online loans as suitable to their business operation conditions and loan characteristics, ensuring security, safety, protection of data messages and information confidentiality in accordance with the laws on money laundering prevention and combat and e-transactions, the State Bank of Vietnam’s guidance on risk management, and relevant legal documents.

2. The information systems used for online lending must comply with regulations on assurance of safety of information systems at level 3 or higher level under the Government’s regulations on assurance of level-based safety of information systems and the State Bank of Vietnam’s regulations on security of information systems in banking operations.

3. Credit institutions shall store and preserve information and data in accordance with law, ensure their safety and confidentiality, and may make backup copies of files to ensure adequacy and integrity of records that enable assess or use when necessary or to serve the inspection, collation, settlement of trace requests, complaints and disputes and provide information at the request of competent state management agencies.

4. A credit institution shall decide by itself on measures, forms and technologies for online lending, bear arising risks (if any) and meet at least the following requirements:

a/ Having technical solutions and technologies to ensure the accuracy, confidentiality and safety in the course of collection, use and verification of information and data;

b/ Adopting measures for inspection, collation, updating and verification of information and data; and measures to prevent acts of forging, intervening or falsifying information and data;

c/ Adopting measures for monitoring, identification, measurement and control of risks; and plans for handling risks;

d/ Assigning responsibility to each individual or division involved in online lending and risk management and control.

5. Credit institutions shall consider and decide on online lending in accordance with Section 3 of this Circular. Contents not mentioned in Section 3 of this Circular must comply with relevant provisions of this Circular.

Article 32b. Identification of customers and verification of know-your-customer information

1. A credit institution shall adopt technical solutions and technologies to identify customers and verify know-your-customer information serving online lending ; and bear arising risks (if any), and must meet at least the following requirements:

a/ Ensuring the consistency of know-your-customer information and customers’ biometric data (i.e., biological factors and characteristics that are linked to a customer to be identified, difficult to be forged, and rarely match with those of another person, such as fingerprints, face, iris, voice and other biometric factors) with the corresponding biometric information and factors stated in necessary documents and data to identify a customer in accordance with the law on money laundering prevention and combat at the request of a credit institution; or with personal identification data authenticated by a competent state agency; or with citizen identity database; or national population database; or those provided by an electronic authentication service provider in accordance with the regulations on electronic identification and authentication or by another credit institution;

b/ Formulating a process of risk management, control and assessment, including measures to prevent acts of impersonating, intervening, altering or falsifying know-your-customer information during the lending process; adopting measures to check and verify know-your-customer information to confirm that customers who perform online transactions are the borrowers; and adopting technical measures to certify the identified customers’ consent to the loan agreement. The process of risk management and control shall be regularly reviewed and revised based on the updated information and data;

c/ Storing and preserving adequate and detailed know-your-customer information and customers’ biometric data; sound, images, video recordings, sound recordings; phone numbers used to make transactions; and transaction log during the lending process.

2. The identification of customers and verification of know-your-customer information specified in Clause 1 of this Article shall apply to individual customers who apply for consumer loans and establish for the first time relationship with a credit institution. For individual customers applying for consumer loans who have established the relationship with a credit institution and have undergone customer identification and know-your-customer information verification, the credit institution may decide to apply measures, forms and technologies to verify know-your-customer information serving online lending, ensuring consistency with the known customer information.

Article 32c. Loan balance

The loan balance for an individual customer who wishes to borrow consumer loans and undergoes customer identification and know-your-customer information verification under Article 32b of this Circular must not exceed VND 100,000,000 (one hundred million) at a credit institution.

Article 32d. Dossiers of application for loans

When wishing to borrow a loan, a client shall send to a credit institution documents and data proving its/his/her satisfaction of the conditions specified in Article 7 of this Circular and other documents and data required by the credit institution.

Article 32dd. Appraisal of dossiers for loan borrowing and decision on loan provision

Credit institutions shall approve online lending in adherence to the principle of assignment of responsibilities of each individual and division for building, establishing and operating information systems to serve the appraisal and decision on loan provision. In case of risks, a credit institution shall adopt a mechanism to identify each individual or division responsible for the risks, and promptly handle arising problems and risks to ensure efficiency and safety in approval of online lending.

Article 32e. Loan agreements

A loan agreement shall be made in writing; for an electronic contract, it is required to comply with the law on e-transactions, and must have at least the contents specified in Article 23 of this Circular.

Article 32g. Retention of dossiers of loan provision

1. A credit institution shall make a dossier of loan provision in the form of data message in accordance with the laws on archive and e-transactions and relevant laws. Such dossier must comprise:

a/ The loan agreement;

b/ Reports on the client’s actual financial status;

c/ The decision on loan provision, which bears the electronic signature of a competent person; in case of a collective decision, a minutes stating the approval of the decision is required;

d/ Know-your-customer information and data (if any); information and data arising in the course of using the loan which are related to the loan agreement as guided by the credit institution.

2. Credit institutions shall retain dossiers of loan provision; the retention period of dossiers must comply with law.

Article 32h. Payment instruments used to disburse loans

Credit institutions shall use payment instruments to disburse loans under the State Bank of Vietnam’s regulations on modes to disburse loans of credit institutions to customers. In case an individual customer wishes to borrow consumer loans and undergoes customer identification and know-your-customer information verification under Article 32b of this Circular, a credit institution may consider and decide on disbursement of the loan to the customer’s payment account at the payment service provider for the customer to pay to the beneficiary for consumption needs as committed by the customer.”.

Article 2. To annul Clause 5, Article 7 of Circular No. 39/2016/TT-NHNN.

Article 3. Responsibility for organization of implementation

The Chief of the Office, the Director of the Monetary Policy Department, and heads of units of the State Bank of Vietnam, and credit institutions shall organize the implementation of this Circular.

Article 4. Implementation provisions

1. This Circular takes effect on September 1, 2023.

2. For loan agreements and credit contracts signed before the effective date of this Circular, credit institutions and clients may continue performing such loan agreements and credit contracts in accordance with regulations effective at the time of their signing. The modification and supplementation, if any, of loan agreements or credit contracts must comply with this Circular.