Circular No. 05/2009/TT-NHNN detailing the implementation of interest rate support for organizations and individuals borrowing medium and long-term bank loans to invest in new production and business development.

CIRCULAR

Detailed regulations on interest rate support for organizations and individuals borrowing medium and long-term bank loans to invest in new projects for production and business development  

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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. 443/QĐ-TTg dated April 4, 2009 of the Prime Minister on interest rate support for organizations and individuals borrowing medium and long-term bank loans to invest in new projects for production and business development;

The State Bank of Vietnam hereby issues detailed regulations on interest rate support for organizations and individuals borrowing medium and long-term bank loans to invest in new projects for production and business development (hereinafter referred to as interest rate support) as follows:

Article 1. Purpose of interest rate support

The State provides interest rate support for medium and long-term bank loans in Vietnamese dong for organizations and individuals investing in new projects to develop production and business, infrastructure construction to reduce investment costs, increase fixed assets and production capacity, product competitiveness, and job creation.

Article 2. Objectives and scope of application of interest rate support regulations

1. Credit institutions shall provide interest rate support for medium and long-term loans in Vietnamese dong for organizations and individuals investing in new projects (projects under construction, procurement before or after April 1, 2009 with construction and procurement periods consistent with grace periods committed in credit contracts), including:

a) Commercial banks as stipulated in Clause 1, Article 2 of 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 activities.

b) Finance companies as stipulated in Clause 1, Article 1 of Decision No. 333/QĐ-TTg dated March 10, 2009 of the Prime Minister amending and supplementing certain provisions of Decision No. 131/QĐ-TTg.

c) Vietnam Development Bank shall provide interest rate support for preferential loan recipients.

2. Borrowers eligible for interest rate support include:

a) Organizations and individuals borrowing from commercial banks and finance companies to invest in new projects for production and business development, infrastructure construction 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 amendments and supplements to certain provisions of the Credit Regulations for Customers issued pursuant to Decision No. 1627/2001/QĐ-NHNN dated December 31, 2001.

b) Project investors borrowing from Vietnam Development Bank to invest in new projects for production and business development, infrastructure construction within the country as stipulated in point a, Clause 2, Article 1 and Article 6 of Decree No. 151/2006/NĐ-CP dated December 20, 2006 of the Government on state investment credit and export credit.

a) Loans from commercial banks and finance companies shall be reported according to 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 and Decision No. 143 TCTK/PPCĐ dated December 22, 1993 of the Director General of the General Statistics Office on the issuance of the second, third, and fourth level economic industry classification systems and the national economic industry directory, including:

- Agriculture and forestry sector;

- Fisheries sector;

- Mining industry;

- Processing industry;

- Electricity, gas, and water supply industry;

- Construction industry (excluding office building construction for lease, construction and repair of houses for sale);

- Trade and repair of motor vehicles, motorcycles, personal and household goods;

- Transportation, warehousing, and telecommunications;

- Scientific research and technological activities.

b) Investment loans from Vietnam Development Bank included in the list of investment credit projects issued pursuant to Decree No. 106/2008/NĐ-CP dated September 19, 2008 of the Government amending and supplementing certain provisions of Decree No. 151/2006/NĐ-CP dated December 20, 2006 on state investment credit and export credit.

Article 3. Principles, time limit, interest rate level, and method of interest rate support.

1. The principle of interest rate support is that commercial banks, financial companies, and the Vietnam Development Bank provide medium and long-term capital loans to implement new investment for production and business development, infrastructure construction under normal lending mechanisms and implement interest rate support in accordance with the regulations of the Prime Minister and guidelines of the State Bank of Vietnam.

2. The maximum loan period eligible for interest rate support is 24 months, starting from the disbursement date for loans under credit contracts signed before and after April 1, 2009, which were disbursed between April 1, 2009, and December 31, 2009. Interest rate support will be implemented from April 1, 2009, to December 31, 2011. Loans within this interest rate support category that are overdue, extended, or have a loan term exceeding 24 months will not be eligible for interest rate support during the overdue, extension, and excess periods.

4. The method of implementing interest rate support is that when collecting loan interest, commercial banks, financial companies, and the Vietnam Development Bank reduce the amount of interest payable by the borrower by the amount of interest supported. The State Bank of Vietnam transfers the supported loan interest based on reports of the supported interest amounts from commercial banks, financial companies, and the Vietnam Development Bank.

Article 4. Procedures and responsibilities of borrowers, commercial banks, financial companies, and the Vietnam Development Bank in implementing interest rate support.

1. For borrowers with loans eligible for interest rate support:

a) During the period from April 1 to December 31, 2009, when a first-time loan occurs at a commercial bank, financial company, or the Vietnam Development Bank, the borrower must submit a request for interest rate support according to Model 01 in the Appendix of this Circular, including loans occurring from April 1, 2009, to the effective date of this Circular.

b) Use the borrowed funds for the purpose specified in the credit contract, which is eligible for interest rate support. If the borrowed funds are not used for the intended purpose, then interest rate support will not be provided, and the borrower must repay the previously supported interest to the commercial bank, financial company, or the Vietnam Development Bank and be subject to legal penalties.

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

d) Record the payment of loan interest according to the actual amount due to the commercial bank, financial company, or the Vietnam Development Bank after receiving interest rate support as stipulated by law.

2. For commercial banks, financial companies, and the Vietnam Development Bank:

a) Implement interest rate support for borrowers in accordance with the regulations of the Prime Minister and guidelines of the State Bank of Vietnam; they may not refuse interest rate support if the loan falls within the eligible category; regularly report to the State Bank of Vietnam for inspection and supervision of interest rate support implementation.

b) Based on the purpose of using the borrowed funds eligible for interest rate support, record the provisions regarding interest rate support in the credit contract 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 Management and General Director (Director) of commercial banks and financial companies, and the Chairman of the Management Council and General Director of the Vietnam Development Bank are responsible and subject to legal penalties for cases of non-compliance with interest rate support regulations. For commercial banks and financial companies, if there is a violation, it will be considered in annual classification, additional paid-in capital, and issuance of permits for the establishment of banking networks.

- For commercial banks and financial companies: 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 and other related legal documents.

- For the Vietnam Development Bank: Apply preferential lending mechanisms and interest rates as stipulated in Decree No. 151/2006/NĐ-CP, Decree No. 106/2008/NĐ-CP, and other related legal documents.

đ) Conduct pre-loan, ongoing, and post-loan inspections to ensure compliance with legal interest rate support regulations. If a borrower uses the borrowed funds for purposes not eligible for interest rate support, recover the previously supported loan 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.

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

g) When collecting interest on loans from customers, commercial banks, finance companies, and the Vietnam Development Bank shall deduct the amount of interest that customers are required to pay by the amount of subsidized interest rate according to the provisions of the law. In cases where the due date for interest collection has not arrived by December 31, 2011, commercial banks, finance companies, and the Vietnam Development Bank must calculate the amount of interest that customers are required to pay and deduct the amount of interest by the amount of subsidized interest rate. The calculation and collection of loan interest shall be carried out in accordance with the provisions of the law; accounting and tracking of the interest on loans eligible for subsidized interest rates shall be conducted as follows:

- Recording all interest on loans into income in accordance with the current financial regulations; interest on loans for subsidized interest rates transferred by the State Bank of Vietnam shall be recorded in a separate account (account "Receivables" - Sub-account: Receivable from the State Bank of Vietnam for interest rate subsidies in 2009-2011).

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

h) Preparing an interest subsidy confirmation document with the acknowledgment of both the customer and the lending bank or finance company (signing and stamping) as evidence for inspection and supervision. The interest subsidy confirmation document shall be prepared in two copies, one copy retained in the credit file, and one copy sent to the borrower. Such documents shall be prepared each time interest is collected and the subsidized interest is deducted, or prepared monthly in accordance with the reporting period for interest subsidies to the State Bank of Vietnam. For farmers borrowing capital, such documents shall be prepared in the last month of each quarter during the subsidy period.

i) Submitting registration forms for plans and reports on the amount of interest subsidies to the State Bank of Vietnam using the templates attached to this Circular:

- Quarterly interest subsidy plan registration form according to templates 02 and 03 attached to this Circular, to be submitted no later than the 10th day of the first month of each quarter; the second quarter 2009 interest subsidy plan registration form to be submitted no later than April 15, 2009.

- Monthly report on the implementation of interest subsidies according to templates 04, 05, and 06 attached to this Circular, to be submitted no later than the 10th day of the month following the reporting month, ensuring accuracy and timely submission.

Timely and accurately tracking and statistically analyzing loans receiving interest subsidies to serve internal audits, reporting to the State Bank of Vietnam, and inspections and supervision by competent state agencies; opening accounts or applying appropriate management systems to record and statistically track separately loans receiving interest subsidies.

Article 5. Responsibilities of the State Bank of Vietnam

1. Monthly, transfer up to 90% of the interest on loans that have been subsidized according to reports from commercial banks, finance companies, and the Vietnam Development Bank. The transfer of the remaining subsidized loan interest annually shall be carried out after receiving the final report on interest subsidies from commercial banks, finance companies, and the Vietnam Development Bank.

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 regarding interest subsidies when necessary.

3. Responsibilities of units under the State Bank of Vietnam to assist the Governor of the State Bank of Vietnam in implementing contents related to the organization 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 situation of interest subsidies from commercial banks, finance companies, and the Vietnam Development Bank; notify commercial banks, finance companies, and the Vietnam Development Bank about the transfer of interest subsidy funds; guide the settlement of interest subsidy funds; prepare reports for submission.

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

c) Trading Center: Carry out accounting entries and transfer interest subsidy funds to commercial banks, finance companies, and the Vietnam Development Bank.

d) Banking Inspection and Supervision Authority (State Bank of Vietnam Inspectorate): Conduct inspections, supervision, and handling of commercial banks, finance companies, the Vietnam Development Bank, and borrowers who violate laws on interest subsidies.

đ) State Bank of Vietnam branch in provinces and centrally-administered cities: Implement inspection, supervision, and inspection within their authority of the implementation of laws on interest subsidies, report and propose to the Governor of the State Bank of Vietnam and the Chairman of the People's Committee of provinces and centrally-administered cities to address arising issues.

Article 6. Implementation Organization

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

2. The Director of the Office, Heads of the Department of Monetary Policy, Heads of units under the State Bank of Vietnam, Governors of State Bank of Vietnam branches in provinces and centrally-administered cities, Chairmen of the Board of Directors and General Directors (Directors) of commercial banks and finance companies, Chairmen of the Management Council and General Directors of the Vietnam Development Bank, and borrowers are responsible for implementing this Circular./.