Joint Circular No. 02-LB/TC-NH on prohibiting borrowing, advance payments, credit sales, and debt repayment among economic organizations without going through banks.

JOINT CIRCULAR

Regarding the prohibition of lending, advance payments, credit sales, and debt repayment relationships between economic organizations that do not go through banks
The Ministers of various Ministries and Heads of agencies at the ministerial level,

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Decision No. 15-CP dated May 31, 1960 of the Council of Ministers provides principles for managing cash stating: "...All transactions between organizations with accounts at the Bank must be settled by transfer, except for small payments as specified by the Bank..."

Resolution No. 86-CP dated May 9, 1966 of the Council of Ministers on accelerating production and thrift to ensure financial revenue and expenditure and cash requirements in the current situation states: "On the basis of accelerating production and construction, organizing well transportation work, expanding commodity circulation, strengthening economic and financial management, urgently improving distribution and utilization management of labor, materials, capital, enhancing thrift discipline, we must strive to ensure revenue for the budget, strengthen mobilization of financial and banking capital, concentrate on ensuring necessary budget and credit capital needs to accelerate production and combat, serve the plan for economic restructuring, while striving to achieve positive balance in financial revenue and expenditure and cash, contributing to stabilizing currency, prices, and ensuring people's livelihood."

Thus, in transaction relations between economic units, the State strictly prohibits advance payments, credit purchases, and credit sales, except for specific cases separately prescribed by the State such as prepayment for newspaper purchases, state trading units advancing purchase payments for agricultural products from cooperatives... Cash payments must be strictly carried out according to the regulations of the State Bank.

However, currently, many enterprises, construction sites, economic units, defense, administrative, and public service units have not strictly adhered to the above regulations of the State. Many units have transferred funds or used cash to make advance payments for orders to state-owned production and business units and small-scale cooperative and handicraft units in a widespread manner. Some units have received advance payments from hundreds of units, and in some places, the amount of advance payments received exceeds the working capital quota. Many units have provided large amounts of cash to purchasing staff for payment of goods in situations where they should have been settled through the Bank. Many units have lent capital to workers and officials for personal needs.

This situation is due to many reasons, but mainly because enterprises and economic units have not correctly followed financial discipline. In the new situation, there are many urgent production and combat requirements not included in the plan and also not signed in economic contracts beforehand, so some enterprises need additional capital and materials. Therefore, in some cases, supply units force buyers to transfer funds or provide advance payments (order deposits) to ensure production or material supply. On the buyer side, there are also enterprises and agencies that only want to complete their own tasks and have not correctly followed financial discipline, thus requiring suppliers to accept advance payments to obtain materials and goods earlier and more reliably. In the use of cash, many places have reported inaccurately to the State Bank to withdraw more cash, keeping excess cash reserves beyond the prescribed limits, leading to improper spending.

As for the supervisory agencies, financial authorities have not managed various types of capital strictly enough, with many cases of surplus capital, or insufficient capital allocation, or untimely allocation, creating conditions for enterprises and agencies to use capital contrary to principles; the State Bank and Construction Bank, through payment and fund transfer, have not fully utilized their function as controllers of money, failing to promptly detect and take measures to address the aforementioned violations.

Advance payments and credit purchases mentioned above violate directives and regulations of the Prime Minister, contravene the principle of the central credit, cash, and payment role of the State Bank, thereby creating conditions for improper capital use, violating socialist financial management principles, limiting the function of the financial and credit system as controllers. In reality, there have been many cases where purchase and sale prices do not follow directive prices, materials and goods are not distributed reasonably, not based on production and combat needs in the spirit of socialism, and many cases of loose cash payments leading to embezzlement and waste, unable to recover debts, resulting in loss of State capital.

The advance payment and credit sale/purchase arrangements mentioned above contravene the directives and regulations of the Prime Minister, violate the central credit, cash, and settlement principles of the State Bank, thereby facilitating the misuse of funds contrary to the socialist financial management principles, and limiting the supervisory function of the financial credit system. In practice, there have been many cases where purchase and sale prices do not follow the prescribed prices, materials and goods are not distributed reasonably, not based on the production and combat needs in the spirit of socialist cooperation, and there have been many instances of loose cash payments leading to embezzlement and waste, with unrecoverable debts resulting in the loss of state capital.

Advance payments, credit purchases, and credit sales still create obstacles for economic accounting; enterprises receiving advance payments have excess working capital, thus avoiding bank supervision and not needing to borrow from banks. Enterprises requiring advance payments suffer from insufficient capital, unable to settle debts promptly, leading to mutual capital occupation and even occupying state tax and interest payments. Administrative and service agencies making advance payments make it difficult for financial authorities to monitor improper expenditures, especially at year-end when they often violate settlement discipline by using unspent allocated funds to make advance payments and then settling accounts as actual expenditures.

To address this situation, the relevant ministries remind enterprises, construction sites, economic units, defense units, administrative and service agencies to strictly comply with the Prime Minister's directive prohibiting commercial lending, advance payments, credit purchases, and debt repayments between economic organizations without going through banks. Specifically, enterprises, construction sites, economic organizations, defense agencies, administrative and service agencies, financial authorities, Construction Bank, and State Bank must perform the following tasks:

Between enterprises and agencies, there must be strengthened economic contract systems, particularly timely signing of specific contracts and strict compliance with them. Production and trading enterprises must supply materials and goods based on the most urgent needs of production and combat with full responsibility. In cases of unexpected demands outside the plan, if the seller lacks materials, the buyer should request the State Planning Commission to allocate additional materials to the enterprise; if the seller lacks capital, they should apply for loans from the State Bank to reserve additional materials according to current credit regulations. In any situation, both parties must cooperate under socialist principles to resolve issues without making advance payments to each other.

Enterprises, construction sites, economic organizations, administrative and service agencies, and defense units must strictly adhere to cash expenditure regulations. Only amounts below thirty đồng may be paid in cash, primarily to individual private entities. State-owned enterprises, handicraft cooperatives, and agricultural cooperatives (with deposit accounts at the State Bank) cannot be paid in cash for amounts exceeding the State Bank's regulations. For workers and staff traveling to purchase or on business trips, only advance payments for minor expenses such as labor fees, purchasing supplies from individual private entities, travel expenses, and business trip costs are allowed, and these must be settled within the specified time frame. Expenditures exceeding the State Bank's regulations must be settled through the bank, and special accounts can be opened upon request for expenses incurred elsewhere, according to Regulation No. 19-KT/KH dated June 15, 1966, issued by the State Bank regarding improving non-cash payment operations in new circumstances. If an enterprise frequently receives materials for processing and thus has excess working capital, superiors should adjust working capital quotas or timely regulate capital to prevent the enterprise from consistently having excess capital and lacking banking relationships.

Financial authorities need to strengthen the review and timely provision of adequate capital to enterprises, economic organizations, defense units, and administrative and service agencies (including emergency expenditures). Local administrative agencies should consider signing supply contracts between local supervisory agencies and central economic organizations and budgeting these expenditures into local budgets, providing timely allocations to sectors. Additionally, financial authorities should enhance regular oversight to detect and promptly prevent advance payments, credit purchases, and other violations of financial regulations.

Construction Bank agencies must strictly manage construction units and construction units (installation enterprises and basic construction self-construction units) and not allow these units to provide advance payments to production and trading enterprises for machinery, equipment, building materials, etc.

State Bank agencies need to implement non-cash payment systems and new loan settlement regulations. Through loan settlement operations and cash management, bank agencies should monitor and control money transfers for purchases, thereby promptly preventing money transfers or advance payments to production and trading enterprises. When bank agencies discover advance payments, they should assist the seller in transferring the amount back to the buyer; if this is not possible due to certain reasons, a separate "advance payment retention account" should be established, not included in the enterprise's deposit account. Once the seller delivers goods to the buyer, the State Bank agency will handle the payment for the selling unit.

Initially, State Bank agencies need to coordinate with financial authorities to help enterprises, construction sites, economic organizations, defense units, and administrative and service agencies with advance payment relationships develop plans to settle these payments within a specified period. During settlement, if some advance payments cannot be recovered by the buyer or the seller lacks sufficient grounds to claim the debt, State Bank and financial agencies will work with enterprises to find appropriate solutions in accordance with state regulations.

Direct all Ministries, General Departments, Provincial and Municipal Administrative Committees to instruct enterprises, construction sites, economic organizations, defense units, and subordinate administrative and service agencies to fully comply with the provisions set forth in this Circular. The State Bank, Finance Ministry, and Construction Bank shall be responsible for urging enterprises and agencies to properly implement this Circular, and if they encounter difficulties or obstacles, they must promptly report to the State Bank and the Ministry of Finance along with recommendations for consideration and resolution.