Circular No. 02/2010/TT-NHNN detailing the implementation of interest rate support for bank loans in 2010 to purchase machinery, equipment, materials for agricultural production, and construction materials for housing in rural areas.

CIRCULAR

Detailed regulations on interest rate support for bank loans in 2010 to purchase machinery, equipment, materials for agricultural production and construction materials for rural housing

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Pursuant to Resolution No. 43/2009/NQ-QH12 dated November 27, 2009 of the National Assembly on questioning and answering questions at the sixth session of the XIIth National Assembly;

Pursuant to Resolution No. 54/NQ-CP dated November 11, 2009 of the Government on the regular meeting of the Government in October 2009;

Pursuant to Decision No. 497/QĐ-TTg dated April 17, 2009 of the Prime Minister on interest rate support for loans to purchase machinery, equipment, materials for agricultural production and construction materials for rural housing;

Pursuant to Decision No. 2213/QĐ-TTg dated December 31, 2009 of the Prime Minister amending and supplementing some Articles of Decision No. 497/QĐ-TTg dated April 17, 2009 of the Prime Minister on interest rate support for loans to purchase machinery, equipment, materials for agricultural production and construction materials for rural housing;

After reaching consensus with the Ministry of Finance, the State Bank of Vietnam hereby issues detailed regulations on interest rate support for organizations and individuals borrowing from banks in 2010 to purchase machinery, equipment, materials for agricultural production and construction materials for rural housing (hereinafter referred to as interest rate support) as follows:

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

1. Credit institutions implementing interest rate support include:

a) State-owned commercial banks, joint-stock commercial banks, joint venture banks, foreign bank branches operating in Vietnam, wholly foreign-owned banks, and Central People's Credit Funds (collectively referred to as commercial banks).

b) Financial companies (excluding specialized financial companies operating in consumer credit and card sectors according to the law) that comply with the State Bank of Vietnam’s regulations on safety ratios in the operations of credit institutions, provisions for loan loss reserves, and have non-performing loan ratios below 5% of total outstanding credit.

2. Borrowers eligible for interest rate support include:

a) Households, farm owners, individuals, cooperative groups, cooperatives, enterprises borrowing short-term and medium-term Vietnamese dong loans to purchase machinery, equipment, materials for agricultural production;

b) Households and individuals borrowing short-term and medium-term Vietnamese dong loans to purchase construction materials for housing in commune areas, excluding urban wards and towns.

3. Types of loans eligible for interest rate support are short-term and medium-term Vietnamese dong loans under credit contracts signed and disbursed between January 1, 2010 and December 31, 2010 to purchase domestically produced goods, including:

a) Machinery and equipment products serving agricultural production and processing;

b) Light trucks with a carrying capacity of less than five tons;

c) Desktop computers;

d) Agricultural production materials:

- Chemical fertilizers: Urea, phosphoric rock, superphosphate, NPK fertilizers with nutrient content (N, P₂O₅, K₂O) of 18% or higher, DAP fertilizer;

- Plant protection chemicals listed in the Catalogue of plant protection chemicals permitted for use in Vietnam issued together with Circular No. 09/2009/TT-BNN dated March 3, 2009 of the Ministry of Agriculture and Rural Development.

e) Main building materials: Cement, construction steel, bricks, tiles, roofing sheets.

Article 2. Principles, conditions, time limits, loan amounts, interest rate support levels, methods of interest rate support, and loan application documents for interest rate support

1. The principle of interest rate support is that commercial banks and financial companies provide short-term and medium-term loans in Vietnamese dong to purchase machinery, equipment, materials for agricultural production, and construction materials for housing in rural areas based on the business capital balance of commercial banks and financial companies according to normal lending mechanisms; implement interest rate support in accordance with the regulations of the Prime Minister and guidelines of the State Bank of Vietnam.

2. Conditions for interest rate support:

a) For borrowers:

- Borrowers who borrow to purchase machinery, equipment, materials for agricultural production must directly engage in agricultural production or serve agricultural production (not for resale).

- Borrowers who borrow to purchase construction materials for housing must have a legal place of residence in the commune and be confirmed by the Commune People's Committee.

b) For goods receiving interest rate support:

- Goods produced or assembled by organizations and individuals (with production bases located in Vietnam established and operating under Vietnamese law);

- Must have a product label in accordance with Decree No. 89/2006/NĐ-CP dated August 30, 2006 of the Government on product labels.

3. The period for interest rate support starts from the date of disbursing the loan within the timeframe from January 1, 2010 to December 31, 2010;

a) Maximum of 24 months, for loans to purchase machinery, equipment, materials for agricultural production and processing, and desktop computers; interest rate support will be implemented from January 1, 2010 to December 31, 2012.

b) Maximum of 12 months, for loans to purchase agricultural materials and various construction materials for housing; interest rate support will be implemented from January 1, 2010 to December 31, 2011.

c) Loans eligible for interest rate support that are overdue, extended, or exceed the supported loan period as specified in points a and b of this clause shall not be eligible for interest rate support during the period of overdue payment, extension, and exceeding the supported loan period.

4. Maximum loan amount:

a) For machinery, equipment, materials serving agricultural production and processing, and agricultural production materials: The maximum loan amount is equal to 100% of the value of the goods; the specific loan amount is determined by commercial banks and financial companies according to normal lending mechanisms.

b) For desktop computers: The maximum loan amount is equal to 100% of the value of the goods but not more than five million Vietnamese dong per unit; the specific loan amount is determined by commercial banks and financial companies according to normal lending mechanisms.

c) For various construction materials for housing: The maximum loan amount is equal to 100% of the value of the goods but not exceeding fifty million Vietnamese dong; the specific loan amount is determined by commercial banks and financial companies according to normal lending mechanisms.

5. Interest rate support level:

a) Support 100% of the interest rate on the loan amount and actual loan period for loans to purchase goods specified in points a, b, and c of Clause 3, Article 1 of this Circular.

b) Support 2% per year of the interest rate on the loan amount and actual loan period for loans to purchase goods specified in point d and đ of Clause 3, Article 1 of this Circular.

6. In cases where borrowers are eligible for interest rate support and have balances in deposit accounts and securities denominated in Vietnamese dong and foreign currency (collectively referred to as deposit account balances) or loans collateralized or guaranteed by securities, savings books, and other forms of money in Vietnamese dong and foreign currency (collectively referred to as securities), interest rate support shall be implemented as follows:

a) For borrowers with deposit account balances at commercial banks, financial companies, and other credit institutions, when signing credit contracts, commercial banks and financial companies consider the entire deposit account balance as the borrower's own capital, and the loan amount must exclude (-) this deposit account balance. Borrowers are responsible for reporting their deposit account balances and the value of securities denominated in Vietnamese dong and foreign currency at other credit institutions and bear responsibility for the legality and accuracy of these reports. Deposit account balances in Vietnamese dong and foreign currency include: Demand deposits and term deposits; term savings deposits, non-term savings deposits, and other savings deposits; excluding dedicated deposit account balances, performance bonds, and frozen deposits as stipulated by law.

b) For loans collateralized by securities, when signing credit contracts, commercial banks and financial companies consider the total value of the securities as the borrower's own capital, and the loan amount must exclude (-) this security value.

c) For loans guaranteed by securities, commercial banks and financial companies provide interest rate support for the remaining loan balance by subtracting (-) the value of the guaranteed securities from the loan balance at the time of signing the credit contract.

d) For deposit account balances and securities denominated in foreign currency, they are converted into Vietnamese dong based on the foreign currency buying rate of commercial banks and financial companies at the time of determining the deposit account balance and the value of the securities.

7. The method of implementing interest rate support is that when collecting loan interest, commercial banks and financial companies reduce the amount of interest payable to borrowers by the amount of interest supported. The State Bank of Vietnam transfers the supported loan interest based on reports of the supported interest rates submitted by commercial banks and financial companies.

8. Loan application documents for interest rate support:

a) A loan application, in cases where customers borrow funds to purchase construction materials for housing, must be accompanied by confirmation from the People's Committee of the commune regarding their lawful residence in that commune.

b) A plan or scheme for using machinery, mechanical equipment, and materials for production and serving production purposes; using construction materials for building housing.

c) Proof documents demonstrating the purpose of borrowing funds to purchase goods, such as sales contracts or invoices; borrowers are responsible under the law for the accuracy and legality of these documents. Commercial banks and financial companies base their review on these documents to assess the feasibility and legality of the borrower's purpose for using borrowed funds.

d) A credit agreement.

đ) Other documents according to the usual lending mechanism.

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

1. For borrowers with loans falling within the scope of interest rate support:

a) From January 1, 2010 to December 31, 2010, when initiating a loan at a commercial bank or financial company for the first time, borrowers shall submit an interest rate support request to the commercial banks and financial companies according to Appendix 01 of this Circular.

b) Provide complete and truthful information and documents to prove the purpose of borrowing funds eligible for interest rate support and bear responsibility for the accuracy of the provided information and documents. Use the borrowed funds for the intended purpose as specified in the credit agreement. If the borrowed funds are not used for the intended purpose, interest rate support will not be provided, and the borrower must repay the previously supported interest to the commercial bank or financial company and be subject to legal sanctions.

c) Comply with the procedures for borrowing funds, interest rate support, and reporting systems established by commercial banks and financial companies.

d) Record the payment of interest on borrowed funds according to the amount of interest payable to the commercial bank or financial company after receiving interest rate support as stipulated by law.

đ) Request commercial banks and financial companies to implement interest rate support in accordance with the Prime Minister's regulations and the State Bank of Vietnam's guidelines.

2. For commercial banks and financial companies:

a) Implement interest rate support for borrowers in accordance with the Prime Minister's regulations and the State Bank of Vietnam's guidelines; they may not refuse to provide interest rate support if the loan falls within the scope and meets the conditions for interest rate support as prescribed; regularly report to the State Bank of Vietnam for inspection and supervision of interest rate support implementation.

b) Based on the purpose of using borrowed funds eligible for interest rate support, record the terms of interest rate support in the credit agreement in accordance with the law; reject requests for interest rate support that do not comply with the law.

c) The Chairman of the Board of Directors and General Manager (Director) of commercial banks and financial companies are responsible and subject to legal sanctions for cases of non-compliance with the law in providing interest rate support. For commercial banks and financial companies, violations will be considered in annual classification, additional capital increase, and licensing for the establishment of banking networks and financial company operations.

d) Apply standard mechanisms and interest rates for loans typically provided to borrowers eligible for interest rate support in accordance with the lending regulations for organizations 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 documents.

đ) Conduct pre-loan, during-loan, and post-loan inspections, and coordinate between commercial banks and financial companies in loan assessment and approval to ensure compliance with legal provisions for interest rate support. If it is discovered that borrowers are misusing funds for purposes eligible for interest rate support, recover the previously supported interest; if recovery is not possible, report to the competent state authority for handling or initiate legal action against the borrower's breach of the credit agreement.

e) Guide borrowers to ensure convenient, safe, and appropriate borrowing.

g) When collecting interest from borrowers, commercial banks and financial companies reduce the interest payable by the borrower by the amount of interest supported according to the law. For medium-term loans where interest collection has not been due by December 31, 2012, commercial banks and financial companies must calculate the interest payable by the borrower and implement the reduction of interest by the amount of supported interest. Interest calculation and collection follow legal provisions; record and monitor the interest payable under interest rate support as follows:

- Record all interest income according to current financial regulations; the interest supported by the State Bank of Vietnam is recorded in a separate account according to the State Bank of Vietnam's guidance on recording interest support in 2010.

- Maintain a detailed ledger (or database) tracking loans eligible for interest support (borrower, loan amount, term and interest rate, amount of interest support...) to be sent to the borrower for monitoring, statistics, internal audit, reporting to the State Bank of Vietnam, and oversight by the competent state authority.

h) Prepare interest subsidy confirmation papers with customer and commercial bank, financial company lending institution's endorsement (signatures, seals) to serve as verification and monitoring documents. The interest subsidy confirmation papers shall be prepared in two copies, one copy retained for credit file, one copy sent to the borrowing customer. Interest subsidy confirmation papers shall be prepared each time interest on loans is collected and the subsidized interest amount deducted, or prepared periodically monthly in accordance with the deadline for reporting interest subsidies to the State Bank of Vietnam. For farmer households borrowing funds, the interest subsidy confirmation papers shall be prepared in the last month of each quarter during the interest subsidy period.

i) Send registration forms for interest subsidy plans and reports on the amount of interest subsidies to the State Bank of Vietnam according to Appendixes 02, 03, and 04 of this Circular:

- Quarterly interest subsidy plan registration form according to Appendix 02 of this Circular, to be submitted no later than the 10th day of the first month of the quarter; the Q1 2010 interest subsidy plan registration form to be submitted no later than January 30, 2010.

- Monthly report on the implementation of interest subsidies according to Appendices 03 and 04 of this Circular, to be submitted no later than the 10th day of the month following the reporting month, ensuring accuracy and timely submission.

k) Timely and accurately track and record all interest-subsidized loans to serve internal audit purposes, report to the State Bank of Vietnam, and comply with supervisory checks by competent state authorities; open accounts or apply appropriate management systems to account for and record separately all interest-subsidized loans.

l) Retain loan files for interest-subsidized loans in accordance with legal regulations.

Article 4. Responsibilities of the State Bank of Vietnam

1. Monthly transfer up to 90% of the interest on loans that have been interest-subsidized based on the reports from commercial banks and financial companies. The remaining interest on loans that have been interest-subsidized will be transferred annually after receiving the final report on interest subsidies from commercial banks and financial companies.

2. Lead and coordinate with the Ministry of Finance, the Ministry of Industry and Trade, and the Ministry of Agriculture and Rural Development to conduct inspections and supervision of the implementation of legal provisions 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 address issues related to the interest subsidy mechanism; receive registration forms for interest subsidy plans and reports on the situation of interest subsidies from commercial banks and financial companies; notify relevant units under the State Bank of Vietnam about the amount of interest subsidies to transfer interest subsidies to commercial banks and financial companies; guide the settlement of interest subsidies; prepare reports to submit to the Prime Minister.

b) Department of Finance and Accounting: Address accounting issues related to the interest subsidy mechanism (original vouchers for accounting, transferring interest subsidies...).

Trading Center: Carry out accounting and transferring of interest subsidies to commercial banks and financial companies according to notifications from the Department of Monetary Policy and decisions of the Governor of the State Bank.

Banking Inspection and Supervision Authority: Conduct inspections, supervision, and handling of commercial banks, financial companies, and borrowers who violate legal provisions on interest subsidies.

đ) Branches of the State Bank in provinces and centrally-administered cities: Implement inspection, supervision, and auditing within their authority of the implementation of legal provisions on interest subsidies and report and propose to the Governor of the State Bank and the Chairman of the People's Committee of provinces and centrally-administered cities to handle 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. Heads of the Office, Department of Monetary Policy, and heads of units under the State Bank, Governors of branches of the State Bank in provinces and centrally-administered cities; Chairmen of the Boards of Directors and General Managers (Directors) of commercial banks and financial companies, customers are responsible for implementing this Circular./.