Circular No. 08/1997/TT-NHNN guides the handling of damaged debts and lending for the recovery and development of production caused by Typhoon No. 5 (LINDA) for coastal provinces in southern Vietnam and central Vietnam.

CIRCULAR

Guidelines for handling

debts affected by losses and providing loans to restore and develop production
according to Decision No. 985/TTg dated November 20, 1997
of the Prime Minister on addressing the aftermath
of Typhoon No. 5 (LINDA) in southern coastal provinces and central-southern provinces

To implement Decision No. 985/TTg dated November 20, 1997, Document No. 6075/KTN dated November 28, 1997, and Announcement No. 140/TB dated December 4, 1997 of the Prime Minister on addressing the aftermath of Typhoon No. 5, restoring and developing production in southern coastal provinces and central-southern provinces, the Governor of the State Bank guides the handling of debts from loans affected by losses and continues to provide loans to restore and develop production as follows:

I. ON HANDLING DEBTS FROM LOANS AFFECTED BY LOSSES CAUSED BY TYPHOON NO. 5

1. Extension of debt: Based on the damage survey stipulated in Article 1 of Decision No. 985/TTg dated November 20, 1997 of the Prime Minister, commercial banks, investment and development banks, poverty service banks, and people's credit funds (collectively referred to as banks) shall extend debt for loans related to losses suffered by households and borrowing enterprises. Specifically, if households and enterprises have not been directly damaged but suffer losses in terms of personnel and other assets leading to difficulties in repaying loans on time, and if the borrower requests it, the bank shall extend the debt according to the current regulations on debt extension.

2. Debt write-off: Commercial state-owned banks, investment and development banks, poverty service banks, and people's credit funds at the grassroots level shall process applications to write off debts from loans affected by losses caused by Typhoon No. 5. The procedures and documentation for debt write-off shall be carried out in accordance with Circular No. 11/TC-NHNN dated August 22, 1994 issued jointly by the State Bank and the Ministry of Finance. The debt write-off period will start from November 1, 1997 (Typhoon No. 5 occurred on November 2, 1997), and during this period, interest will not be calculated temporarily. Branches of the State Bank in provinces and cities directly affected by Typhoon No. 5 shall guide people's credit funds in preparing debt write-off applications and consolidating them within their jurisdictions.

Applications for debt write-off from state-owned commercial banks, investment and development banks, and branches of the State Bank in provinces and cities should be submitted to the State Bank (Credit Department) no later than January 15, 1998 for consolidation. The joint Ministry of the State Bank and the Ministry of Finance will conduct spot checks on some units in some localities as a basis for reviewing and approving debt write-offs.

For the debt write-off of the people's credit fund system, the State Bank will coordinate with the Ministry of Finance to determine the budgetary support source for the uncollected interest during the write-off period, to be reported to the Prime Minister for decision.

The Credit Department of the State Bank is responsible for consolidating, together with the Ministry of Finance, to review and submit the debt write-off applications of banks and people's credit funds to the joint Ministry for approval.

3. Among the debts proposed for write-off, if the borrowers are completely unable to repay the debts due to losses, then state-owned commercial banks and investment and development banks shall consolidate (in the same manner as for debts proposed for write-off) and submit written recommendations for debt cancellation by the People's Committees of provinces and cities to the State Bank (Credit Department). The Credit Department of the State Bank is responsible for consolidating these recommendations to report to the Governor of the State Bank for submission to the Prime Minister regarding measures to handle such debts.

II. CONTINUING TO PROVIDE LOANS TO RESTORE AND
DEVELOP PRODUCTION

According to Decision No. 985/TTg and Document No. 6075/KTN of the Prime Minister, state-owned banks are assigned to provide two types of loans to restore and develop production after Typhoon No. 5: preferential loans within a total amount of 2000 billion VND and regular loans using the banks' own mobilized capital according to current regulations.

A. PREFERENTIAL LOAN TYPE

1. Designation of Banks for Preferential Loans: Assign state-owned banks including the Agricultural and Rural Development Bank, the Industrial and Commercial Bank, the Foreign Trade Bank, and the Investment and Development Bank to provide preferential loans to address the aftermath of Typhoon No. 5 as specified by the Prime Minister.

2. Source of Funds for Preferential Loans: As directed by the Prime Minister, the banking sector has allocated 2000 billion VND for preferential loans with low-interest rates for residents directly affected by Typhoon No. 5, which includes:

1000 billion VND to be self-raised by state-owned commercial banks and investment and development banks from the public and economic organizations both domestically and internationally.

1000 billion VND to be loaned by the State Bank to state-owned commercial banks and investment and development banks over a five-year period. The amount of each bank's loan will be based on its loan demand within the allocated preferential loan quota.

3. Allocation of Preferential Loan Quotas: Within the preferential loan quota of 2000 billion VND as specified by the Prime Minister, the allocation will be made to provinces and cities based on the extent of damage and distributed among designated state-owned banks.

a. Based on the results of the damage survey, provincial People's Committees shall prepare preliminary plans requesting preferential loan capital (detailed by each branch of commercial banks) and send them to the Central State Bank as stipulated in Point 3 of Government Announcement No. 140/TB dated December 4, 1997 (directly sent to the Economic Research Department, Fax number: 04.8240132) no later than December 18, 1997. The Central State Bank will balance and allocate preferential loan capital to designated state-owned banks and provinces/cities within the 2000 billion VND limit, based on the extent of damage, and notify the loan quotas to the banks, provinces/cities, and branches of the State Bank in provinces/cities.

b. The State Bank will allocate the quota of self-raised capital and State Bank loans within the 2000 billion VND limit for state-owned banks to provide loans; the ratio between the two types of capital for each bank will be appropriate to the loan needs and specific conditions of each bank.

Pending the results of damage investigations and loan requirements of provinces and cities to compile and allocate official expenditures, designated State-owned banks shall implement loans according to the capital temporarily advanced by the State Bank to these banks and temporarily allocated a portion of the targets to meet the timely loan needs.

4. Borrowers: The VND 2,000 billion for preferential loans to restore losses caused by Typhoon No. 5, as specified in Article 6 and Article 12 of Decision No. 985/TTg dated November 20, 1997; Point 1 of Document No. 6075/KTN dated November 28, 1997, and Point 3 of Notification No. 140/TB dated December 4, 1997, specifically include the following objects:

Repairing, building new fishing vessels, purchasing fishing gear that have been damaged, sunk, or lost.

Restoring damages to bottom nets, offshore nets, shrimp breeding ponds that have been damaged.

Preferential borrowers must be those that existed previously but were damaged by Typhoon No. 5 and need restoration; for new construction to replace sunken, lost, or severely damaged vessels that cannot be repaired, they may upgrade to larger vessels with a power capacity of 90 HP or more to develop distant-water fishing. This preferential loan capital shall not be used for lending to other objects outside the aforementioned provisions.

5. Interest rate on loans:

Short-term loans: 0.5% per month;

Medium-term loans: 0.6% per month;

Overdue interest rates shall be calculated according to the general ratio applicable to each period as announced by the Governor of the State Bank.

6. Loan terms:

Short-term loans: Based on the capital turnover time of the borrower, but not exceeding 12 months. Short-term loans apply only to minor repairs of damaged fishing vessels and equipment, and restoring bottom nets, offshore nets, and shrimp breeding ponds that have been damaged.

Medium-term loans: Based on the capital turnover of the borrower and repayment capability, but not exceeding five years. These apply to new construction of fishing vessels due to sinking, loss, or severe damage that cannot be repaired, and major repairs of severely damaged fishing vessels and equipment.

The VND 1,000 billion from the State Bank that the banks can use for medium-term loans; if insufficient, part of the VND 1,000 billion raised for preferential loans can be used to supplement medium-term loans; short-term loans use funds raised by the banks.

7. Loan list: Based on the damage investigation results as stipulated in Article 1 of Decision No. 985/TTg, loan demand, and allocated targets, the People's Committee of the province/city shall establish and approve the loan list for banks to base their lending on. The approved loan list must clearly state: full name, address (village, commune, district, province); amount needed; purpose (object) of the loan; term of the loan, and the branch of the bank providing the loan. The allocation of banks for lending should ensure convenience for both the borrower and the lending bank as follows:

If the borrower previously borrowed from a particular commercial bank branch, that bank will provide the loan to restore the damage caused by Typhoon No. 5.

For new loans, they will be allocated based on the convenience of the customer, with the branch of the bank responsible for the area providing the loan.

8. Loan procedures: Procedures for loans to restore the aftermath of Typhoon No. 5 should be simplified. Banks will base their guidance on the list approved by the People's Committee of the province/city to assist borrowers in completing the loan procedures. Borrowers listed in the approved list of the People's Committee of the province/city only need to submit a loan application form confirmed by the People's Committee of the commune/ward and directly sign the promissory note with the lending bank, and bear responsibility for repaying the principal and interest when due. In cases where multiple households or individuals approved for loans form a cooperative group to build large-capacity vessels for distant-water fishing, the loan procedures will still be conducted separately for each household or individual, not through a representative of the group. During the loan process, measures should be taken to review, monitor, and cross-check against the approved list; those named in the approved list must directly sign the promissory note and receive the loan money to prevent misuse and negative practices, ensuring that the loan reaches the intended borrower and object.

Borrowers do not need to collateralize, pledge, or guarantee; however, for repair and new construction of fishing vessels, if deemed necessary to secure the debt, the vessel itself obtained through the loan can be used as collateral for the loan if it has not been pledged for another loan.

Collateral and pledge procedures for this type of loan should be simple: in the loan application and loan agreement, it only needs to specify collateral by the fishing vessel obtained through the loan; the loan disbursement will proceed before signing the collateral contract. After the fishing vessel is completed and has all required certificates for operation as per regulations of the competent authority (Inspection Authority and Fisheries Resource Protection Authority), both parties will sign the collateral and pledge contract (without requiring certification from a Notary Public or District People's Committee) to supplement the loan documentation.

9. Collection of principal and interest:

For short-term loans, the principal and interest will be collected simultaneously at the end of the loan term; if the borrower wishes to repay early and pay monthly interest, this will be agreed upon between the commercial bank and the borrower.

For medium-term loans, after the completion of new construction or major repairs and putting into use, the lending bank will divide the repayment periods for principal and interest within the determined loan term.

10. Extension of debt: During the loan and repayment process for preferential loans to mitigate the aftermath of Typhoon No. 5, if the borrower encounters objective difficulties in repaying on time, an extension may be considered according to current regulations of the Governor of the State Bank.

11. Preferential loans to mitigate the aftermath of Typhoon No. 5, commercial banks and Development Investment Bank must organize accounting and monitoring separately.

B. TYPES OF REGULAR LOANS

In addition to the beneficiaries of preferential loans as prescribed by the Prime Minister as directed in Part A, Section II of this Circular, other entities directly or indirectly affected by Typhoon No. 5 may be granted loans from regular capital sources when they have borrowing needs. The interest rate for such loans shall be the regular lending rate within the current interest rate framework stipulated by the Governor of the State Bank. Banks should pay attention to lending to the following categories:

If the allocated capital for preferential loans does not meet the borrowing requirements of the preferential loan beneficiaries listed in the approval of the People's Committee of the province or city, banks shall supplement with regular loans at normal interest rates to ensure both the mitigation of the typhoon's aftermath and fairness among borrowers who can access both types of capital at two different interest rates, thereby preventing people from having to borrow at high-interest rates.

Loans shall be provided to rice fields, sugar cane, vegetables, and other crops that have been damaged to restore agricultural production.

Loans shall be provided to enterprises tasked with importing wood from Cambodia and Laos for shipbuilding and repair; loans for importing marine machinery to mitigate the effects of Typhoon No. 5; loans in appropriate foreign currencies according to import payment contracts signed between the parties if required. For non-state-owned enterprises tasked with importing wood, marine machinery, repairing, and building new ships, if collateral is insufficient, they may use their import contracts, repair contracts, and new shipbuilding contracts as security for the loan.

Banks need to closely coordinate to close the lending and debt collection process in line with the capital flow cycle among related stages such as: households borrowing to repair and build new ships - service enterprises for ship repair and construction - enterprises selling marine machinery and wood for ship repair and construction...

III. RESPONSIBILITIES FOR IMPLEMENTATION:

1. Designated banks responsible for lending must use the loan capital for the intended purposes and beneficiaries as prescribed. Every ten days, these banks must report the progress of lending to the State Bank (Credit Department). The Credit Department will monitor the implementation progress and compile reports for the Governor of the State Bank.

2. Relevant departments of the State Bank are responsible for guiding necessary operations: The Accounting and Finance Department of the State Bank will guide accounting and monitoring procedures for preferential loans to mitigate the aftermath of Typhoon No. 5; The Foreign Exchange Management Department will guide the handling of foreign currency and payments for wood and machinery imports for ship repairs and construction.

3. The Director of the State Bank Branch in the province has the responsibility to oversee, urge, and inspect the lending activities of commercial bank branches in the area, reporting to the People's Committee of the province or city and the Governor of the State Bank. They should propose measures to the People's Committee of the province or city to address cases of misusing loan funds, defaulting on repayment, or facing risks of non-repayment.

4. The Banking Inspection Agency is responsible for inspecting the use of State Bank loans by commercial banks to ensure that loans are made for the correct purpose and to the correct beneficiaries.

During inspections, if improper lending or misuse of loan funds is discovered, it shall be handled according to the current credit regulations.

This Circular takes effect from the date of issuance, replacing Directive No. 11/1997/CT-NHNN14 dated November 14, 1997, of the Governor of the State Bank regarding banking measures to mitigate the aftermath of Typhoon No. 5.