THE GOVERNOR OF THE STATE BANK OF VIETNAM

DECIDES:

Article 1.- To issue together with this Decision the Regulation on loan provision to customers by credit institutions.

Article 2.- This Decision takes effect as from September 15, 2000 and replaces the State Bank Governor’s Decision No.324/1998/QD-NHNN1 of September 30, 1998 promulgating the Regulation on loan provision to customers by credit institutions.

Article 3.- For credit contracts which have been signed before this Decision takes effect but the credit has not yet been disbursed or fully disbursed, and for credit contracts with credit already granted and with debit balances available by the end of September 14, 2000, the concerned credit institutions and their customers shall continue complying with the signed contracts till the full recovery of the loans or reach agreement on amendment or supplement of the credit contracts in conformity with the Regulation on loan provision to customers by credit institutions issued together with this Decision.

Article 4.- The heads of units attached to the State Bank; the directors of the State Bank’s branches in the provinces and centrally-run cities; the chairmen of the managing boards and general directors (directors) of credit institutions as well as customers who borrow capital from credit institutions shall have to implement this Decision.

State Bank Governor
LE DUC THUY

Article 1.- Scope of regulation

This Regulation stipulates the provision of loans in Vietnam dong and foreign currencies by credit institutions to their customers in order to meet the latter’s demand of capital for production, business, services, development investment and life improvement.

Article 2.- Subjects to application

1. Credit institutions established and engaged in lending operation under the Law on Credit Institutions.

2. Customers borrowing capital from credit institutions, including:

a/ Legal persons being State enterprises, cooperatives, limited liability companies, joint-stock companies, foreign-invested enterprises and other organizations that fully satisfy conditions stipulated in Article 94 of the Civil Code;

b/ Individuals;

c/ Family households;

d/ Cooperation groups;

e/ Private enterprises;

f/ Partnerships.

Article 3.- Interpretation of terms:

In this Regulation the following terms shall be construed as follows:

1. Loan provision is a form of granting credit, thereby a credit institution provides a customer with a sum of money for use for a certain purpose in a given period of time as agreed upon on the principle of repayment of both principal and interest.

2. Lending term means a duration counted from the time a customer begins to receive the loan capital till the time both principal and interest are fully repaid, as agreed upon in the credit contract between the concerned credit institution and such customer.

3. Debt-repayment schedule mean different time periods within the loan term, by the end of each of which, as already agreed upon by a credit institution and a customer, the customer shall have to repay part or the whole of the loan to the credit institution.

4. Adjustment of debt-repayment schedule means a credit institution and a customer agree on adjusting the debt-repayment schedule agreed upon earlier in the credit contract.

5. Loan extension means a credit institution accepts the extension of the loan term agreed upon in a credit contract for a certain period of time.

6. Investment project, business, production and/or service plan or investment project, plan in service of life improvement means a set of proposals on capital demand, mode of using capital and corresponding results gained within a given period of time from concrete production, business and service activities as well as from development investment and life improvement.

7. Credit limit means the maximum debit balance to be maintained for a given period of time agreed upon by a credit institution and a customer in the credit contract.

Article 4.- Implementation of the provisions on foreign exchange management

For foreign currency loans, credit institutions and their customers shall have to strictly abide by the Government’s regulations and the State Bank’s guidance on foreign exchange management.

Chapter II

SPECIFIC PROVISIONS

Article 5.- The right to lending autonomy of credit institutions

Credit institutions shall take self-responsibility for their loan decisions. Neither organization nor individual is allowed to unlawfully interfere in the right to lending autonomy of credit institutions.

Article 6.- Capital-borrowing principles

Customers borrowing capital from credit institutions shall have to comply with the following principles:

1. To use the loan capital for the right purpose(s) as agreed upon in the credit contracts;

2. To repay both principals and interests on schedule agreed upon in the credit contracts;

3. To ensure that the loan-security comply with the regulations of the Government and the State Bank Governor.

Article 7.- Capital-borrowing conditions

Credit institutions shall consider and decide to provide loans for customers if the latter fully satisfy the following conditions:

1. Having civil legal capacity and civil act capacity and taking civil liability as prescribed by law. More concretely:

a/ A legal person must have civil legal capacity;

b/ An individual or owner of a private enterprise must have legal capacity and civil act capacity;

c/ A family household’s representative must have legal capacity and civil act capacity;

d/ A cooperation group’s representative must have legal capacity and civil act capacity;

e/ A partnership member must have legal capacity and civil act capacity.

2. Having financial capability to ensure the full debt repayment within the committed time-limits;

3. Using loan capital for lawful purpose(s);

4. Having feasible and efficient investment projects or business, production and/or service plans, or feasible investment projects and/or plans in service of life betterment, enclosed with feasible debt-repayment plans;

5. Complying with the loan-security regulations issued by the Government and guided by the State Bank Governor.

Article 8.- Types of loans

1. Short-term loans: Credit institutions shall provide short-term loans for customers to meet the latter’s demand of capital for production, business, services and life improvement.

2. Medium- and long-term loans: Credit institutions shall provide medium- and long-term loans for customers so that the latter implement investment projects for the development of production, business and services and life improvement.

Article 9.- Loan objects:

1. Credit institutions may lend the following objects:

a/ The value of materials, goods, machinery and equipment, including the value added tax in the total goods lot’s value, and the expenses for implementation of investment projects, production, business and/or service plans; or investment projects and/or plans in service of life betterment;

b/ The customers’ following financial demands:

- The export and/or import tax amount to be paid by customers to complete the export and/or import procedures for goods lots in which the said credit institutions are involved in providing loans;

- The loan interest amounts payable to lending credit institutions within the period when the fixed assets have been constructed but not yet handed over nor put into use, for medium- or long-term loans with payable interest amounts included in the value of the fixed assets which have been invested with the loan capital.

- The loan capital amounts borrowed by customers to repay debts (in cash) to foreign countries, provided that such debts have been guaranteed by domestic credit institutions and the following conditions are fully met: The investment projects, production, business and/or service plans or investment projects, plans in service of life improvement using the said loans are efficiently implemented; the to be- provided loan falls within the debt-repayment time-limit; the customers meet conditions for more favorable capital borrowing or may save expenses as compared with the borrowing of foreign capital and have the capability to repay debts;

- The other financial demands in service of the production, business and service provision process as well as life improvement according to the regulations of the State Bank.

2. Credit institutions must not lend the following objects:

a/ The tax amount payable directly to the State budget, except for the export and import tax amount stipulated in Paragraph 1, Point b, Clause 1 of this Article;

b/ The money amounts for both loan principal and interest repayment to other credit institutions;

c/ The loan interest amount payable to the lending credit institutions themselves, except for cases where such interest amounts are lent under the provisions at Paragraph 2, Point b, Clause 1 of this Article.

Article 10.- Lending terms

Credit institutions and customers shall reach agreement on terms of providing loans, which may be either of the two following types:

1. Short-term loans: The term shall be 12 months at most, determined according to the production and/or business cycle as well as customers’ debt-repayment capability.

2. Medium- or long-term loans: The term shall be determined according to the capital retrieval duration of the investment projects, the customers’ debt-repayment capability and the nature of the loan capital sources of the concerned credit institution:

a/ Medium- term loans: The term ranges from over 12 months to 60 months;

b/ Long-term loans: The term shall be over 60 months but must not exceed the remaining operation duration prescribed in the establishment decision or establishment license, for legal persons, and must not exceed 15 years, for loans to investment projects in service of life improvement.

Article 11.- Lending interest rates

1. The lending interest rates shall be agreed upon by credit institutions and customers in accordance with the State Bank’s stipulations on lending interest rates at the time their credit contracts are signed. The credit institutions shall have to make public different lending interest rates to customers.

2. The preferential lending interest rates shall apply to those customers who are entitled thereto under the regulations of the Government and the guidance of the State Bank.

3. In cases where loans are transformed into overdue debts, the interest rates for overdue debts shall comply with the rates prescribed by the State Bank Governor at the time of signing of the credit contracts.

Article 12.- Loan amounts

1. Credit institutions shall base themselves on customers’ capital demand, the Government’s stipulations in Decree No.178/1999/ND-CP on the loan amounts compared with the value of the property used as loan security, the customers’ debt-repayment capability as well as their own capital sources, to decide the loan amounts.

2. The total debit balance of outstanding loans for a customer must not exceed 15% of a credit institution’s own capital, except for loans from the trust fund sources of the Government, organizations or individuals or for cases where the customer is a credit institution.

3. The total debit balance of outstanding loans for subjects defined in Article 21 of this Regulation must not exceed 5% of a credit institution’s own capital.

Article 13.- Repayment of loan principals and interests

1. Basing themselves on the customers’ production, business and/or service characteristics as well as financial capabilities, incomes and debt-repayment sources, credit institutions and their customers shall reach agreement on the repayment of both loan principals and interests, including the following:

a/ The loan-principal repayment deadlines;

b/ The loan-interest payment deadlines which may be the same as loan-principal repayment deadlines or be different;

c/ The currency(ies) used for debt repayment and the preservation of the loan principal’s value in appropriate forms in conformity with the provisions of law.

2. When a debt is due or upon the expiry of a lending term, if a customer is unable to pay debt on schedule, and not entitled to the adjustment of the debt-repayment schedule or to the loan extension, the due debt must be transformed into an overdue debt and the customer shall be liable to the overdue debt interest rate for the delayed payment amount.

3. In cases where a customer pays the debt before it is due, the credit institution and the customer shall reach agreement on the payable loan interest amount, which must not exceed the interest amount already agreed upon in the credit contract.

Article 14.- Capital-borrowing dossiers

1. When having a demand for loan capital, a customer shall have to send to a credit institution the following documents:

- A written request for loan capital with the following principal contents: the customer’s name and address; the capital amount to be borrowed; the capital-borrowing purposes; the commitments on the use of loan capital, the repayment of both loan principal and interest and other commitments.

- The necessary documents proving that he/she/it satisfies the capital-borrowing conditions as stipulated in Article 7 of this Regulation;

The customer shall take responsibility before law for the accuracy and validity of the documents sent to the credit institution.

2. Credit institutions shall specify types of documents to be sent by customers, depending on the characteristics of each category of customers as well as each type of loan in accordance with the provisions in Clause 1 of this Article.

Article 15.- Loan evaluation and decision

1. Credit institutions shall elaborate procedures for considering and approving loans on the principle of ensuring the autonomy and clearly determining the personal responsibility as well as the joint-responsibility of the persons in charge of loan evaluation and decision.

2. Credit institutions shall examine the customers’ documents and at the same time evaluate the feasibility and efficiency of the investment projects, production, business and/or service plans or investment projects, plans in service of life improvement as well as the customers’ debt-repayment capabilities.

Where necessary or prescribed by law, credit institutions may set up credit councils or hire relevant consulting agencies to evaluate the customers’ investment projects, production, business and/or service plans or investment projects and/or plans in service of life improvement.

3. Within 10 working days for short-term loans or 45 working days for medium- and long-term loans, after receiving the full and valid capital-borrowing dossiers as well as necessary information provided by customers at their requests, credit institutions shall have to decide and notify the customers of the approval or non-approval of the loans. If refusing to provide loans to the customers, the credit institutions shall have to notify in writing the customers thereof, clearly stating the reasons therefor.

Article 16.- Lending modes

Based on the customer’s demand for the use of each loan and the credit institution’s capability to inspect and supervise the use of loan capital by the customer, the credit institution shall reach agreement with its customer on the lending mode, which may be one of the following:

1. Separate lending: For each time of capital borrowing, a customer and the concerned credit institution shall proceed with necessary procedures and sign a credit contract.

2. Lending according to credit limit: Credit institutions and customers shall define and agree on a credit limit to be maintained in a certain period of time or according to a production/business cycle.

3. Lending according to investment project: Credit institutions shall provide loans to customers for the implementation of investment project(s) on developing production, business, services and investment projects in service of life improvement.

4. Syndicated capital lending: A group of credit institutions jointly provide loans for a customer’s capital-borrowing project or plan; one of these credit institutions shall act as coordinator for the management and coordination with other institutions. The syndicated capital lending shall be effected in accordance with this Regulation and the Regulation on co-financing by credit institutions, issued by the State Bank Governor.

5. Installment repayment loan: In capital borrowing, a credit institution and its customer shall determine and agree on the payable sum of both loan principal and interest, which shall be divided for repayment in different installments by the customer within the lending term.

6. Lending according to reserve credit limit: A credit institution shall commit itself to get ready to lend capital to a customer within a certain limit of credit. The credit institution and customer shall reach an agreement on the effective time-limit of the reserve credit limit as well as the level of fee to be paid therefor.

7. Lending through the issuance and use of credit cards: A credit institution may allow its customer to use the loan capital within the credit limit to pay for the purchased goods and services and withdraw money from automatic telling machines or from cash-distributing agents of such credit institution. When providing loan with the issuance and use of credit cards, the credit institution and its customer shall have to abide by the regulations of the Government and the State Bank on the issuance and use of credit cards.

8. Other lending modes, compatible with the provisions of this Regulation and other stipulations of the State Bank.

Article 17.- Foreign currency loans

1. Credit institutions licensed to engage in foreign exchange transactions shall be entitled to provide foreign currency loans for customers being residents under the Government’s regulations and the State Bank’s guidance on foreign exchange management.

The definition of resident shall comply with the provisions of Article 4 of the Government’s Decree No.63/1998/ND-CP of August 17, 1998 on foreign exchange management.

2. Capital-borrowing dossier: In addition to the documents stipulated in Article 14 of this Regulation, a customer shall also have to send to the concerned credit institution the following: The import permit or import quota (if any); the import or entrusted import contract and other documents related to the use of loan capital.

3. Repayment of loan principals and interests: Loans in any foreign currency must be paid in such foreign currency. In cases where a loan is repaid in another currency or Vietnam dong, such repayment shall be effected according to the agreement between the credit institution and the customer and the currency conversion shall be based on the foreign exchange rate or on the principle for determining the foreign exchange rate as agreed upon in the credit contract. Foreign-invested enterprises which have to balance their foreign currency demands by themselves must not repay foreign currency loans in Vietnam dong.

Article 18.- Credit contracts

After deciding to provide a loan, a credit institution and its customer shall sign a credit contract. The credit contract must contain the loan conditions, the loan-use purposes, the ways of loan capital disbursement and use, the loan amount, the interest rate, the loan term, the debt-repayment mode and deadline, the loan security form, the value of the security property, the measures for handling the security property, the transfer or non-transfer of the credit contract and other commitments agreed upon by the involved parties.

Article 19.- Loan limits

1. The total debit balance of outstanding loans for a customer shall not exceed 15% of the own capital of a credit institution, except for loans from the trust fund sources of the Government, organizations and individuals. In cases where a customer’s capital demand exceeds 15% of the own capital of a credit institution or the customer has the need to mobilize capital from various sources, the credit institutions shall provide syndicated loans in accordance with the regulations of the Governor of the State Bank.

2. In special cases, credit institutions may provide loans in excess of the loan limit stipulated in Clause 1 of this Article only when so permitted by the Prime Minister on a case-by-case basis.

3. The determination of a credit institution’s own-capital amount to serve as basis for calculating the loan limit as stipulated in Clauses 1 and 2 of this Article shall comply with the regulations of the State Bank.

Article 20.- Cases where loans are not provided

1. A credit institution must not provide loans for customers being the following subjects:

a/ Members of the Managing Board and Control Commission, the General Director (Director), Deputy General Director (Deputy Director) of such credit institution;

b/ The person who evaluates and approves loans;

c/ Father, mother, wife, husband or children of a member of the Managing Board or Control Commission, the General Director (Director), or the Deputy General Directors (Deputy Directors).

2. The provisions of Clause 1 of this Article shall not apply to cooperative credit institutions.

Article 21.- Loan restrictions

A credit institution must not provide loans without security, or loans with preferential conditions on interest rates or loan amounts to the following subjects:

1. The auditing organizations and/or auditors that are auditing such credit institution; the chief accountant and/or inspectors;

2. Major shareholders of the credit institution;

3. An enterprise where one of the subjects specified in Clause 1, Article 77 of the Law on Credit Institutions owns more than 10% of the enterprise’s charter capital.

Article 22.- Inspection and supervision of loan capital

1. Credit institutions shall have to inspect and supervise the borrowing, use and repayment of loan capital by their customers.

2. Credit institutions shall conduct the inspection and supervision before, during and after the lending, suited to their operation characteristics as well as the customers’ business characteristics and their use of loan capital.

Article 23.- Loan extension and adjustment of debt-repayment schedules

1. If a customer is unable to fully pay a mature debt due to objective causes and files a written request for loan extension, the concerned credit institution shall consider and decide the loan extension according to the following stipulations:

a/ The extended duration of a short-term loan shall be equal to a production/business cycle at most but must not exceed 12 months; except for special cases allowed by the State Bank Governor or assigned by the State Bank Governor to credit institutions for consideration and decision;

b/ The extended duration of a medium- or long-term loan shall at most be equal to half of the lending loan term already agreed upon in the credit contract; except for special cases allowed by the State Bank Governor or assigned by the State Bank Governor to credit institutions for consideration and decision;

c/ If a due debt can neither be paid nor extended, it must be turned into an overdue debt and the overdue-debt interest rate shall apply.

2. In cases where a customer fails, due to objective causes, to repay the debt on schedule as agreed upon in the credit contract and submits a written request for the adjustment of debt-repayment schedule, the concerned credit institution shall consider such adjustment. If the debt-repayment schedule cannot be adjusted, the credit institution shall turn the due debt into an overdue debt.

3. A customer’s request for loan extension and/or debt-repayment schedule adjustment and the approval thereof by a credit institution must be effected before the debt becomes due and the involved parties may agree on the supplements to the credit contract according to the new debt-repayment schedule.

4. For extended loans and loans with adjusted debt-repayment schedules, the interest rates already agreed upon in the credit contracts for the undue debts shall still apply till the end of the extended duration or of the adjusted schedule.

Article 24.- Exemption or reduction of loan interest

Credit institutions shall be entitled to decide the exemption or reduction of the loan interests to be paid by their customers, on the following principles:

1. The customers suffer from property losses related to the loan capital due to objective causes, thus leading to their financial difficulties;

2. The level of loan interest exemption and/or reduction shall depend on the financial capability of the credit institutions;

3. Credit institutions must not exempt or reduce loan interests for customers being subjects prescribed in Clause 1, Article 78 of the Law on Credit Institutions.

4. Credit institutions shall have to issue regulations on loan interest exemption or reduction for customers, which must be ratified by their respective Managing Boards. The loan interest exemption or reduction for customers shall be effected only when the credit institutions’ regulations on loan interest exemption or reduction are available.

Article 25.- Rights and obligations of customers

1. Borrowing customers shall have the right:

a/ To refuse the credit institutions’ requirements which vary with the agreements in the credit contracts;

b/ To complain or initiate lawsuits against breaches of the credit contracts according to law.

2. Borrowing customers shall have the obligations:

a/ To fully and honestly provide information and documents related to the borrowing and take responsibility for the accuracy of such information and documents;

b/ To use the loan capital for the right purpose(s) and according to the contents agreed upon in the credit contracts;

c/ To repay both debt principals and interests as agreed upon in the credit contracts;

d/ To take responsibility before law for failing to comply with the debt- repayment agreements and fulfill the obligations on loan security as already committed in the credit contract.

Article 26.- Rights and obligations of credit institutions

1. Credit institutions shall have the right:

a/ To request customers to provide documents proving the feasibility of their investment projects, production, business and/or service plans or the investment projects and/or plans in service of life improvement as well as the financial capabilities of the customers and the guarantors before deciding the loans;

b/ To refuse customers’ requests for loans if such customers are deemed unqualified for the loans, or their projects or plans prove inefficient or contrary to the provisions of law or if the credit institutions themselves do not have enough capital sources for loans;

c/ To inspect and supervise the process of capital borrowing and use as well as debt repayment by customers;

d/ To terminate the lending and retrieve debt before schedule if detecting that customers have provided untrue information or breached the credit contracts;

e/ To initiate lawsuits against customers if the latter breach the credit contracts or against the guarantor according to the provisions of law;

f/ When a debt is due, if the customer fails to pay it and the involved parties do not reach any other agreement, the concerned credit institution shall be entitled to handle the loan security property as agreed upon in the contract to recover the loan in accordance with the provisions of law, or request the guarantor to fulfill his/her/its guaranteeing obligation, in cases where the customer borrows capital with guaranty.

g/ To exempt or reduce loan interests, extend loans, adjust debt-repayment schedules according to the provisions of this Regulation; to purchase or sell debts according to the regulations of the State Bank and effect the debt rollover, debt freezing or debt write-off in accordance with the Government’s stipulations.

2. Credit institutions shall have the obligations:

a/ To strictly abide by the agreements in credit contracts;

b/ To keep the credit dossiers in accordance with the provisions of law.

Article 27.- Provision of soft loans and loans for capital construction investment according to the State’s plans

1. Credit institutions shall provide loans for customers who are entitled to preferential credit policies according to the Government’s stipulations and the State Bank’s guidance in each period.

2. State credit institutions shall provide loans for construction investment according to the State’s plans under the law provisions on investment and construction as well as the Government’s regulations on investment and construction credit according to annual State’s plans.

3. For State credit institutions nominated by the Government to provide loans for customers that are entitled to preferential treatment and loans for construction investment according to the State’s plans, if there have appeared any interest rate differences or loss to the loans due to objective causes, the handling thereof shall comply with the Government’s regulations and the State Bank’s guidance as well as the regulations of concerned ministries and branches.

4. Before providing a soft loan or loan for construction investment according to the State’s plan, a credit institution shall evaluate the efficiency of the related project or plan and if such project or plan is deemed inefficient and the borrower is unable to repay the loan principal and interest, such credit institution shall report it to the competent State agency(ies) and, if necessary, to the Prime Minister, for consideration and decision.

Article 28.- Trust loans

1. Credit institutions shall provide loans as entrusted by the Government, organizations or individuals inside and outside the country under the trust loan contracts signed with the representative agency(ies) of the Government or of the concerned domestic or foreign organizations or individuals. The trust loan provision must comply with the current provisions of the legislation on banking credit and trust contracts.

2. Credit institutions providing trust loans shall enjoy trust fee and other benefits as agreed upon in the trust loan contracts, in accordance with the provisions of international law and practices, so as to cover their expenses and risks and also to earn profits.

Chapter III

IMPLEMENTATION PROVISIONS

Article 29.- Credit institutions and capital borrowers shall have to implement this Regulation. Basing themselves on this Regulation and the relevant legal documents, credit institutions shall issue documents providing detailed professional guidance in accordance with their own conditions, characteristics and charters.

Article 30.- Organizations and/or individuals that violate this Regulation shall, depending on the nature and seriousness of their violations, be disciplined, administratively handled or examined for penal liability according to law.

Article 31.- Any amendments or supplements to this Regulation must be decided by the State Bank Governor.

State Bank Governor
LE DUC THUY