Circular No. 06/2007/TT-NHNN amending and supplementing Circular No. 08/2005/TT-NHNN dated December 30, 2005 of the State Bank of Vietnam guiding the implementation of Decree No. 48/2001/NĐ-CP dated August 13, 2001 on the organization and operation of People's Credit Funds and Decree No. 69/2005/NĐ-CP dated May 26, 2005 of the Government amending and supplementing certain articles of Decree No. 48/2001/NĐ-CP dated August 13, 2001 of the Government on the organization and operation of People's Credit Funds.

CIRCULAR

AMENDMENTS AND SUPPLEMENTS TO CIRCULAR NO. 08/2005/TT-NHNN DATED DECEMBER 30, 2005 GUIDING THE IMPLEMENTATION OF DECREE NO. 48/2001/NĐ-CP DATED AUGUST 13, 2001 ON THE ORGANIZATION AND OPERATIONS OF RURAL CREDIT COOPERATIVES AND DECREE NO. 69/2005/NĐ-CP DATED MAY 26, 2005 OF THE GOVERNMENT AMENDING AND SUPPLEMENTING CERTAIN PROVISIONS OF DECREE NO. 48/2001/NĐ-CP DATED AUGUST 13, 2001 ON THE ORGANIZATION AND OPERATIONS OF RURAL CREDIT COOPERATIVES

On December 30, 2005, the State Bank issued Circular No. 08/2005/TT-NHNN guiding the implementation of Decree No. 48/2001/NĐ-CP dated August 13, 2001 on the organization and operations of rural credit cooperatives and Decree No. 69/2005/NĐ-CP dated May 26, 2005 of the Government amending and supplementing certain provisions of Decree No. 48/2001/NĐ-CP dated August 13, 2001 on the organization and operations of rural credit cooperatives.13/2001 on the organization and operations of rural credit cooperatives and Decree No. 69/2005/NĐ-CP dated 26/05/2005 of the Government amending and supplementing certain provisions of Decree No. 48/2001/NĐ-CP dated 13/08/2001 of the Government on the organization and operations of rural credit cooperatives0(hereinafter referred to as Circular No. 08/2005/TT-NHNN). To ensure uniform implementation, the State Bank amends and supplements certain points of Circular No. 08/2005/TT-NHNN as follows:1. Point 3.1 Clause 3 Section I is amended as follows:

"3.1. Residence: Is the act of citizens living at a location within the territory of a commune, ward, town where the basic rural credit cooperative operates under either permanent residence or temporary residence as prescribed by the Law on Residence."

2. Point 1.3 Clause 1 Section II is amended as follows:

"1.3. For basic rural credit cooperatives operating according to industry (production, business, trade associations...) the operational area shall be defined in accordance with the operational area of member enterprises or members of such industry organizations within the scope of a district, county, town, city directly under a province.

For basic rural credit cooperatives operating according to individual enterprises (established and operated in accordance with the Law on Enterprises), the operational area shall be defined in accordance with the operational area of subordinate organizations of such enterprises within the scope of a province, city directly under the central government."

3. Clause 3 Section II is amended as follows:

"3. Capital contribution

Members contribute capital to the basic rural credit cooperative in Vietnamese currency. State agencies and people's armed forces units may not use state assets or public funds to contribute capital to the basic rural credit cooperative.

3.1. Forms of capital contribution and record keeping:

a) Capital contribution established by members: When joining the basic rural credit cooperative, the subjects as stipulated in Clause 2 Section II of this Circular must contribute capital to establish their membership status; when contributing capital to establish their membership status, the contributor will receive a Member Card.

b) Regular capital contribution: After establishing their membership status through capital contribution, members can make regular capital contributions for the basic rural credit cooperative to conduct business activities in the monetary, credit, and banking service sectors; members making regular capital contributions will receive a Contribution Book.

c) The basic rural credit cooperative must maintain records of capital contributions established by members and regular capital contributions of contributing members.

d) Basic rural credit cooperatives may print or hire printing services for member cards and contribution books using different materials, sizes, and layouts but must ensure that all necessary information is included on the member card and contribution book according to the templates provided by the State Bank (Annexes 01 and 02) accompanying this Circular.

3.2. Limits on capital contribution and interest payment methods:

a) Limit on capital contribution: Members may contribute capital in accordance with the Articles of Association; the amount of capital required to establish membership status is determined by the General Assembly of Members but must be at least 50,000 VND (fifty thousand dong); the total capital contribution (capital contribution to establish membership status and regular capital contribution) of each member (including transferred capital) shall not exceed 30% (thirty percent) of the total authorized capital of the basic rural credit cooperative at the time of capital contribution and transfer.

b) Interest payment method: The payment of interest on capital contributions to establish membership status and regular capital contributions shall be decided by the General Assembly of Members of the basic rural credit cooperative in accordance with the law."

4. Subpoint c Point 4.3 Clause 4 Section II is amended as follows:

"c) Basic rural credit cooperatives conducting profitable business operations and classified as Level 1 or 2 by the State Bank according to the Regulation on Classification of Rural Credit Cooperatives issued by the Governor of the State Bank."

5. Point 5.1 Clause 5 Section II is amended as follows:

"5.1. The General Assembly of All Members or the General Assembly of Delegates of the basic rural credit cooperative (collectively referred to as the General Assembly of Members) have the same duties and powers. Based on the actual situation at each basic rural credit cooperative, the Board of Directors decides on the method of organizing the General Assembly of Members, the method of electing delegates to attend the General Assembly of Members, and the number of delegates (at least 30 delegates) attending the General Assembly of Members in each session.

The election of delegates to attend the General Assembly of Members, in principle, should be based on residential areas and the structure of contributing members, but it must ensure a reasonable ratio between the number of representatives from the group of members contributing capital to establish membership status and the number of representatives from the group of members contributing regular capital to ensure democratic equality among contributing members."

6. Point 5.2 Clause 5 Section II is amended as follows:

6. Point 5.2 Clause 5 Section II shall be amended as follows:

"5.2. The members' assembly shall be deemed valid when at least two-thirds of the total number of members or member representatives called to attend are present. Representatives who do not attend the members' assembly may not delegate others to attend on their behalf. In case the required number is not met, the assembly must be temporarily postponed and the Board of Directors or the Supervisory Board must reconvene the assembly within thirty days from the date of postponement (for annual members' assemblies, the postponement and reconvening period shall not exceed the deadline for holding the assembly as prescribed by law)."

7. Point 6.2 Clause 6 Section II shall be amended as follows:

"6.2. The Chairman and other members of the Board of Directors shall be directly elected by the members' assembly through secret ballot; the number of Board of Directors members shall be decided by the members' assembly but shall be a minimum of three persons. The term of office of the Board of Directors shall be determined by the members' assembly and recorded in the Charter of the Credit Cooperative, but shall be a minimum of two years and a maximum of five years.

Depending on actual circumstances, the Credit Cooperative may stipulate in its Charter the full-time working system (working directly and regularly at the Credit Cooperative) or the non-full-time working system (not working directly and regularly at the Credit Cooperative) for the Chairman of the Board of Directors."

8. Clause 7 Section II shall be amended as follows:

"7. Supervisory Board

7.1. The Supervisory Board is an entity with the function of representing members to supervise and inspect all activities of the Credit Cooperative in accordance with the law and the Charter of the Credit Cooperative.

7.2. The Chairman of the Supervisory Board and other members of the Credit Cooperative's Supervisory Board shall be directly elected by the members' assembly through secret ballot. The Supervisory Board shall have a minimum of three people, including at least one full-time supervisor (the Chairman of the Supervisory Board may concurrently hold the position of full-time supervisor); For Credit Cooperatives with fewer than 1,000 members and operating capital of up to 8,000,000,000 VND (eight billion VND), the election of the Supervisory Board or only the election of one full-time supervisor without electing the entire Supervisory Board shall be decided by the members' assembly.

7.3. Depending on actual circumstances, the Credit Cooperative may stipulate in its Charter the full-time working system (working directly and regularly at the Credit Cooperative) or the non-full-time working system (not working directly and regularly at the Credit Cooperative) for the Chairman of the Supervisory Board."

9. Clause 10 Section II shall be amended as follows:

"10. Limitations on Increasing and Decreasing Registered Capital

10.1. Annually, the Board of Directors of the Credit Cooperative must develop a plan for increasing or decreasing registered capital to be submitted to the members' assembly for approval and sent to the State Bank branch in the province or centrally-administered city for written approval to implement. In cases where the increase or decrease in registered capital exceeds the aforementioned plan, it must be approved by the members' assembly and must obtain written approval from the State Bank branch in the province or centrally-administered city.

10.2. Within ninety days from the end of the fiscal year, the Board of Directors of the Credit Cooperative must compile the results of the increase or decrease in registered capital during the year and report to the State Bank branch in the province or centrally-administered city and register with the business registration authority regarding changes in registered capital in accordance with the law."

10. Subpoint b Point 11.2 Clause 11 Section II shall be amended as follows:

"b) Other activities:

- The Credit Cooperative is allowed to open deposit accounts at the State Bank, at the Central Credit Cooperative, and at other credit organizations in accordance with current regulations of the State Bank;

- The Credit Cooperative is allowed to provide payment services for transferring money to members and customers upon permission from the Governor of the State Bank branch in the province or centrally-administered city (after the State Bank branch in the province or centrally-administered city reports and obtains approval from the Governor of the State Bank);

- The Credit Cooperative is allowed to purchase and invest in fixed assets directly serving its business operations, according to the principle that the remaining value of fixed assets does not exceed fifty percent (50%) of Tier 1 capital in the structure of the Credit Cooperative's own capital;

- The Credit Cooperative is allowed to accept agency mandates, act as an agent, and perform other business activities in the field of monetary operations when it meets the conditions stipulated by the current regulations of the State Bank, ensuring effective and safe operations, and must obtain permission from the Governor of the State Bank branch in the province or centrally-administered city."

11. Point 2.2 Clause 2 Section III shall be amended as follows:

"2.2. Use of capital

a) Credit activities:

- The Central Credit Cooperative provides loans to support and enhance the operational efficiency of member Credit Cooperatives; lending to other entities is regulated by the Charter of the Central Credit Cooperative, based on the principle of prioritizing reasonable loan demand of member Credit Cooperatives. The total outstanding loans to other entities (excluding outstanding loans from entrusted funds) shall not exceed fifty percent (50%) of the average operating capital of the Central Credit Cooperative over the quarters of the year; During implementation, if there are difficulties and obstacles, the Central Credit Cooperative shall report to the Governor of the State Bank for consideration and resolution;

- The Central Credit Cooperative has the right to examine, decide, and bear responsibility for loan decisions based on collateral provided by the borrower or third-party guarantees, or loans secured by assets formed from borrowed funds;

- The Central Credit Cooperative is allowed to carry out discounting and rediscounting of negotiable instruments of customers and other credit organizations, provide bank guarantees, and other forms of credit in accordance with current regulations.

b) Other activities:

- The Central Credit Fund may participate in the money market organized by the State Bank, including the Treasury bill auction market, the domestic and foreign interbank markets, and other securities markets; it may engage in foreign exchange transactions upon written approval from the State Bank; it has the right to act as an agent, to be entrusted, and to entrust others in areas related to banking activities;

- The Central Credit Fund may use its charter capital and additional reserve fund to invest in other organizations with the approval of the Governor of the State Bank;

- The Central Credit Fund may purchase and invest in fixed assets directly serving its business operations, subject to the principle that the remaining value of fixed assets does not exceed fifty percent (50%) of the Tier 1 capital within the structure of the Central Credit Fund's own capital.

12This Circular shall take effect fifteen days from the date of publication in the Official Gazette.

13The Director of the Office, the Head of the Department of Cooperative Credit Organizations, the Heads of relevant units under the State Bank, the Governors of the State Bank branches in provinces and centrally-administered cities, the Chairmen of the Management Boards, and the General Directors of the Central Credit Fund; the Chairmen of the Management Boards and the Directors of the Basic Credit Funds are responsible for implementing this Circular.