Circular No. 02/2009/TT-NHNN detailing the implementation of interest rate support for organizations and individuals borrowing from banks to engage in production and business activities

CIRCULAR

Detailed regulations on interest rate support for organizations and individuals borrowing from banks for production and business operations

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Pursuant to Resolution No. 30/2008/NQ-CP dated December 11, 2008 of the Government on urgent measures to prevent economic decline, maintain economic growth, and ensure social welfare;

Pursuant to Decision No. 131/QĐ-TTg dated January 23, 2009 of the Prime Minister on interest rate support for organizations and individuals borrowing from banks for production and business operations;

The State Bank of Vietnam hereby provides detailed regulations on interest rate support for organizations and individuals borrowing from banks for production and business operations (hereinafter referred to as interest rate support) as follows:

Article 1. Object and scope of application of interest rate support regulations

2. Organizations and individuals eligible for interest rate support are borrowers who use loans to implement production and business operation plans within the country as stipulated in Article 1 of Decision No. 127/2005/QĐ-NHNN dated February 3, 2005 of the Governor of the State Bank of Vietnam on amending and supplementing certain provisions of the lending regulations for credit customers issued pursuant to Decision No. 1627/2001/QĐ-NHNN dated December 31, 2001.

a) Loans used as working capital for production and business activities classified according to the economic sectors specified in the Statistical Reporting System applicable to units under the State Bank of Vietnam and credit institutions issued pursuant to Decision No. 477/2004/QĐ-NHNN dated April 28, 2004 of the Governor of the State Bank of Vietnam.

b) Loans used as working capital for production and business activities: Building low-income housing in accordance with current laws; areas of socialization as stipulated in Decree No. 69/2008/NĐ-CP dated May 30, 2008 of the Government on policies encouraging socialization in education, vocational training, healthcare, culture, sports, and environmental activities.

4. Loans classified under industries and fields listed in the Appendix to Decision No. 131/QĐ-TTg are not eligible for interest rate support, including:

a) Medium-term and long-term loans denominated in Vietnamese dong; short-term, medium-term, and long-term loans denominated in foreign currencies.

- Mining industry;

- Financial, banking, and insurance activities, including loans for direct and indirect foreign investments, repayment of foreign debts, repayment of debts to other credit institutions, and repayment of debts at commercial banks where the loans were obtained;

- Activities related to asset trading and consulting services;

- State administration and national defense; political parties and mass organizations; mandatory social security;

- Education and training;

- Healthcare and social assistance activities;

- Cultural and sports activities, including entertainment and leisure businesses;

- Personal and community service activities (including loans for living expenses and through credit card issuance and usage);

- Household service activities;

- Activities of international organizations.

c) Short-term loans denominated in Vietnamese dong for purchasing foreign currency to pay for imported consumer goods as reported in Circular No. 13684/NHNN-CSTT dated December 26, 2007 of the State Bank of Vietnam on temporary reporting. Consumer goods include: Precious stones and metals; passenger cars up to 12 seats; consumer goods as defined in Decision No. 07/2007/QĐ-BTM dated February 28, 2007 of the Minister of Trade on the list of consumer goods for determining import tax payment deadlines, Decision No. 10/2008/QĐ-BCT dated May 16, 2008 of the Minister of Industry and Trade on supplementing the list of consumer goods for determining import tax payment deadlines, and Decision No. 27/2008/QĐ-BCT dated August 11, 2008 of the Minister of Industry and Trade on the list of consumer goods for determining import tax payment deadlines.

d) Loans for investment and securities trading as stipulated in Decision No. 03/2008/QĐ-NHNN dated February 1, 2008 of the Governor of the State Bank of Vietnam on lending and discounting negotiable instruments for investment and securities trading.

đ) Loans for buying and selling land use rights as reported in Circular No. 5659/NHNN-CSTT dated June 25, 2008 of the State Bank of Vietnam on reporting certain credit indicators.

Article 2. Principles, duration, interest rate level, and method of interest rate support

1. The principle of interest rate support is that commercial banks provide loans for working capital needs to operate production and business activities under normal credit mechanisms and implement interest rate support in accordance with the provisions of

2. The maximum loan period eligible for interest rate support is eight months from the date of disbursement, applicable in 2009 for loans under credit contracts signed and disbursed during the period from February 1, 2009 to December 31, 2009; loans with a borrowing period exceeding 2009 shall only be eligible for interest rate support for the borrowing period within 2009; overdue loans and extended loans shall not be eligible for interest rate support for the overdue and extension periods.

3. The level of interest rate support for borrowers is 4% per annum, calculated on the outstanding loan balance and actual loan period from February 1, 2009 to December 31, 2009.

4. The method of implementing interest rate support is that at the maturity of interest payment, commercial banks immediately reduce the amount of interest payable by the borrower by the amount of interest supported. The State Bank of Vietnam will transfer the supported interest based on the report of the supported interest amount submitted by the commercial bank.

Article 3. Procedures and responsibilities of borrowers and commercial banks in implementing interest rate support

1. For borrowers with loans eligible for interest rate support

a) When initiating a loan for the first time at a commercial bank within the period from February 1, 2009 to December 31, 2009, the borrower must submit a request for interest rate support to the commercial bank according to Form 01 attached to this Circular.

b) Utilize the borrowed funds for the purpose specified in the credit contract which is eligible for interest rate support. If the borrowed funds are used for purposes other than those specified in the credit contract, then interest rate support will not be provided, and the borrower must repay the previously supported interest to the commercial bank and be subject to legal penalties.

c) Request the commercial bank to implement interest rate support in accordance with the provisions of

d) Account for the interest payment made to the commercial bank in accordance with the amount of interest payable after receiving interest rate support as stipulated by current laws.

2. For commercial banks

a) Implement interest rate support in accordance with the provisions of the Prime Minister and this Circular; ensure transparency regarding the amount of interest rate support provided to borrowers; refuse requests for interest rate support that do not comply with legal regulations. Based on the purpose of using the borrowed funds eligible for interest rate support, include the terms of interest rate support in the credit contract in accordance with legal regulations.

b) The Chairman of the Board of Directors and General Director (Director) of commercial banks are responsible under the law for cases where interest rate support is not provided in accordance with legal regulations; if violated, they will be subject to legal penalties, and the commercial bank may be reviewed in annual classification, additional paid-in capital, and issuance of permits for banking network operations.

c) Apply normal lending mechanisms and interest rates for borrowing needs eligible for interest rate support in accordance with the Lending Regulations for Customers issued together with Decision No. 1627/2001/QĐ-NHNN dated December 31, 2001 by the Governor of the State Bank of Vietnam and other relevant legal regulations:

- Conduct pre-loan, during-loan, and post-loan inspections to ensure compliance with legal regulations for interest rate support. If it is discovered that the borrower has used the borrowed funds for purposes other than those specified in the credit contract eligible for interest rate support, recover the previously supported interest; if recovery is not possible, report to the competent authority for handling or initiate legal action against the borrower's breach of the credit contract.

- Handle borrowing needs of borrowers in accordance with Clause 3, Article 15 of the Lending Regulations for Customers issued pursuant to Decision No. 1627/2001/QĐ-NHNN and Guideline No. 10307/NHNN-CSTT dated November 21, 2008 of the State Bank of Vietnam on reporting the status of banking credit relationships.

d) Provide interest rate support for short-term loans in Vietnamese dong under credit contracts signed and disbursed during the period from February 1, 2009 to December 31, 2009. For credit contracts signed before February 1, 2009 that include multiple disbursements through promissory notes or receipts, loans disbursed through promissory notes or receipts issued during the period from February 1, 2009 to December 31, 2009 are eligible for interest rate support.

đ) At the maturity of interest payment for borrowers, commercial banks shall reduce the amount of interest payable by the borrower by the amount of interest supported in accordance with legal regulations. If the maturity of interest payment has not been reached by the end of December 31, 2009, commercial banks must calculate the interest payable by the borrower and reduce the interest payable by the amount of interest supported. When reducing the interest payable for the borrower in accordance with the regulations, the commercial bank shall issue a confirmation of interest rate support with the signature and stamp of both the borrower and the lending commercial bank as evidence for inspection and supervision.

e) Calculate and collect interest from borrowers eligible for interest rate support in accordance with the interest calculation methods stipulated in Decision No. 652/2001/QĐ-NHNN dated May 17, 2001 by the Governor of the State Bank of Vietnam on the issuance of regulations on interest calculation and accounting for income and expenditure of the State Bank of Vietnam and other financial institutions, and other relevant legal regulations:

- Record all interest on loans as income according to the accrual principle and the current financial regulations; interest on subsidized loans transferred by the State Bank of Vietnam shall be recorded in a separate account (account "Receivables" - Sub-item: Receivable from the State Bank of Vietnam for interest subsidy in 2009).

- Maintain a detailed list (or database) tracking each subsidized loan (borrower, loan amount, term and interest rate of the loan, amount of interest subsidy...) to send to the borrower for monitoring, statistics, internal audit, reporting to the State Bank of Vietnam, and inspection and supervision by competent state agencies.

g) Submit registration forms for plans and reports on the amount of interest subsidy to the State Bank of Vietnam using the templates attached to this Circular:

- Quarterly registration form for interest subsidy plans, to be submitted no later than the 10th day of the first month of each quarter; registration forms for February and March 2009 interest subsidy plans to be submitted no later than February 10, 2009.

- Monthly report on the implementation of interest subsidy, to be submitted no later than the 10th day of the month following the reporting month, ensuring accuracy and timely submission.

h) Timely and accurately track and compile statistics on subsidized loans to serve internal audits, reporting to the State Bank of Vietnam, and inspections and supervision by competent state agencies; open accounts or apply appropriate management systems to record and compile statistics separately for subsidized loans.

i) Retain loan files for subsidized loans in accordance with Article 55 of the Law on Credit Institutions and guidelines issued by the State Bank of Vietnam.

Article 4. Responsibilities of the State Bank of Vietnam

1. Transfer up to 80% of the interest on loans that have been subsidized according to the reports of commercial banks monthly. The transfer of the remaining interest on subsidized loans in 2009 will be carried out after receiving the final report on interest subsidies from commercial banks.

2. Take the lead and coordinate with the Ministry of Finance and other relevant ministries and sectors to conduct inspections and supervision of the implementation of laws and regulations on interest subsidies when necessary.

3. Responsibilities of units under the State Bank of Vietnam to assist the Governor of the State Bank in implementing matters related to the organization and implementation of the interest subsidy mechanism:

a) Department of Monetary Policy: Coordinate with units under the State Bank of Vietnam to handle issues related to the interest subsidy mechanism; receive registration forms for interest subsidy plans and reports on the implementation of interest subsidies from commercial banks; notify the transfer of interest subsidy funds to commercial banks; guide the settlement of interest subsidy funds; prepare reports to submit to the Prime Minister.

b) Department of Finance and Accounting: Handle accounting issues related to the interest subsidy mechanism (original vouchers for accounting entries, transfer of interest subsidy funds...).

c) Trading Center: Carry out accounting entries and transfers of interest subsidy funds to commercial banks.

d) Banking Inspection and Supervision Authority (State Bank Inspection Authority): Conduct inspections, supervision, and handling of commercial banks and borrowers who violate laws and regulations on interest subsidies.

đ) Branches of the State Bank in provinces and centrally-administered cities: Carry out inspections, supervision, and inspections within their authority on the implementation of laws and regulations on interest subsidies, and report and propose solutions to the Governor of the State Bank and the Chairman of the People's Committee of provinces and centrally-administered cities to address arising issues.

State-owned enterprises that have been assigned by the Ministry of Agriculture and Rural Development to conduct offshore wind power project surveys before the effective date of this Circular shall continue to implement according to the assigned documents; any new matters arising after the effective date of this Circular shall be implemented in accordance with the provisions of this Circular.

1. This Circular takes effect from the date of signature.

2. Establish a Working Group to implement Decision No. 131/QD-TTg, members of which include representatives from the State Bank, the Ministry of Finance, led by a Deputy Governor of the State Bank as the Team Leader.

3. Heads of the Office, Department of Monetary Policy, and heads of units under the State Bank, Governors of State Bank branches in provinces and centrally-administered cities; Chairmen of the Board of Directors and General Managers (Directors) of commercial banks, borrowers are responsible for implementing this Circular.