Circular No. 08/2023/TT-NHNN on conditions for foreign borrowing not guaranteed by the Government

CIRCULAR

Regulations on conditions for foreign borrowing not guaranteed by the Government

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Pursuant to the Law on the State Bank of Vietnam dated June 16, 2010;

Pursuant to the Law on Credit Institutions dated June 16, 2010; the Law Amending and Supplementing Certain Articles of the Law on Credit Institutions dated November 20, 2017;

Pursuant to the Foreign Exchange Law dated December 13, 2005; and the Ordinance amending and supplementing certain provisions of the Foreign Exchange Law dated March 18, 2013;

Pursuant to Decree No. 219/2013/NĐ-CP dated December 25, 2013 of the Government on management of foreign borrowing and repayment by enterprises not guaranteed by the Government;

Pursuant to Decree No. 102/2022/NĐ-CP dated December 12, 2022 of the Government stipulating the functions, tasks, powers, and organizational structure of the State Bank of Vietnam;

At the proposal of the Director of the Department of Foreign Exchange Management;

The Governor of the State Bank of Vietnam issues this Circular to stipulate the conditions for foreign borrowing by borrowers not guaranteed by the Government.

PART I
GENERAL PROVISIONS

Article 1. Scope of Regulation

This Circular stipulates the conditions for foreign borrowing by borrowers not guaranteed by the Government.

Article 2. Applicability

1. Resident individuals who are enterprises, cooperatives, cooperative unions, credit institutions and branches of foreign banks established and operating in Vietnam shall be borrowers of foreign loans (hereinafter referred to collectively as the borrower).

2. Credit institutions and branches of foreign banks in Vietnam where the borrower opens a loan and repayment account for foreign debts (hereinafter referred to as the service-providing bank).

Article 3. Explanation of Terms

In this Circular, the following terms are understood as follows:

1. Short-term foreign self-borrowed and self-repaid loans (hereinafter referred to as short-term foreign loans) are foreign loans not guaranteed by the Government with a term of up to one year.

2. Medium- and long-term foreign self-borrowed and self-repaid loans (hereinafter referred to as medium- and long-term foreign loans) are foreign loans not guaranteed by the Government with a term exceeding one year.

3. Investment projects are projects granted investment certificates, investment registration certificates, or approval documents for investment proposals in accordance with laws on investment and other relevant laws.

4. Other projects are projects that do not fall under the category of investment projects as specified in Clause 3 of this Article.

5. Foreign borrowing costs are the total cost converted into an annual percentage rate based on the value of the loan, including foreign borrowing interest rates and other related costs that the borrower must pay to the lender, guarantors of the loan, loan insurers, agents, and other related parties.

6. Debt restructuring is the repayment of existing foreign debt from new foreign borrowing funds.

7. Foreign loans denominated in Vietnamese dong are foreign loans withdrawn into the borrower's foreign loan and repayment accounts in Vietnamese dong or the debt obligation of the loan is determined in Vietnamese dong.

Article 4. Application of Relevant Legal Provisions

1. Borrowers issuing international bonds in addition to meeting the borrowing conditions stipulated in this Circular, must comply with the provisions of the law on issuing corporate bonds to the international market and other relevant laws.

2. State-owned enterprises, in addition to meeting the borrowing conditions stipulated in this Circular, must comply with the provisions of the law on managing and using state capital for production and business operations in enterprises and other relevant laws.

1. Borrowers borrowing abroad through import of goods on credit are not required to comply with the foreign borrowing conditions stipulated in this Circular.

2. Borrowers borrowing abroad through import of goods on credit are responsible for complying with the regulations guiding foreign exchange management for foreign borrowing and repayment by enterprises, relevant trade laws, foreign trade management laws, and other relevant laws.

Article 6. Principles for the use of foreign loans

1. The borrower shall be fully responsible for using foreign loans for lawful purposes as specified in this Circular.

2. In cases where funds from a loan have been withdrawn but temporarily not used for lawful purposes of foreign borrowing as specified in this Circular, the borrower may deposit such funds with credit institutions or foreign bank branches operating in Vietnam. The maximum term for each deposit shall not exceed one month.

Article 7. Plan for the use of foreign loans

1. The plan for the use of foreign loans is a production and business plan utilizing foreign loans, demonstrating the lawful and reasonable need for foreign borrowing by the borrower. The borrower's plan for the use of foreign loans must be approved by the competent authority in accordance with the Investment Law, Enterprise Law, Law on Credit Institutions, Law on Cooperatives, the charter of the borrower, and other relevant laws (hereinafter referred to collectively as the competent authority approving according to the law).

2. Basic contents of the plan for the use of foreign loans when the borrower is a credit institution or a foreign bank branch:

a) Name of the borrower, type of credit institution, own capital, address, License for establishment and operation of the credit institution or License for establishment of a foreign bank branch, short-term, medium-term, and long-term foreign debt up to the time of formulating the plan;

b) Business objectives, overall capital raising needs, including foreign capital of the borrower;

c) Information about the anticipated foreign loan;

d) Purpose of foreign borrowing: information about (the) group(s) of customers expected to receive credit from foreign loan funds, anticipated interest rate on loans, anticipated loan term;

đ) Scale of foreign borrowing: value of the loan, credit growth target, credit growth situation up to the time of formulating the plan, comparison of the scale of foreign borrowing with remaining credit growth at year-end or with the credit growth scale of the previous year if there is no information on the current year's credit growth target;

e) Risk management measures arising from foreign borrowing;

g) Approval authority for the plan for the use of foreign loans: approval authority, basis for determining approval authority;

h) Other contents (if any).

3. Basic contents of the plan for the use of foreign loans when the borrower is not a credit institution or a foreign bank branch:

a) Name of the borrower, type of enterprise, registered capital, address, Business Registration Certificate, Certificate of Enterprise Registration, Cooperative Registration Certificate, Inter-cooperative Association Registration Certificate and any amendments or supplements (if any), scope of legal production and business activities related to the purpose of using foreign loans by the borrower;

b) Information about the anticipated foreign loan;

c) Purpose and scale of foreign borrowing:

Information about production and business activities, other projects using foreign loan funds within the scope of the borrower's legal operations:

For short-term foreign loans: A list of short-term foreign loan fund usage requirements (hereinafter referred to as the list of fund usage requirements) is prepared according to the model prescribed in the Appendix attached to this Circular and complies with the principles stipulated in Clause 4 of this Article.

For medium- and long-term foreign loans: overall capital scale of production and business activities; capital structure; scale of foreign borrowing; anticipated expenses to be paid from medium- and long-term foreign loan funds;

d) Risk management measures arising from foreign borrowing (if any);

đ) Approval authority for the plan for the use of foreign loans: approval authority, basis for determining approval authority;

e) Other contents (if any).

4. Principles for preparing the list of fund usage requirements:

a) For the purpose of paying short-term debts that must be settled in cash (excluding principal debts arising from domestic loans):

The borrower declares in the list of fund usage requirements all payment obligations within the loan period based on budgeted amounts to be paid according to invoices, documents generating payment obligations such as agreements, contracts signed and issued before the borrower withdraws the loan funds.

In cases where actual payment values differ from those recorded in the list of fund usage requirements due to objective reasons such as the beneficiary not delivering sufficient goods, parties negotiating delayed or accelerated payment schedules, offsetting accounts payable, or tax authorities notifying changes in tax payments, the borrower adjusts the plan for the use of foreign loans to update the list of fund usage requirements consistent with reality and includes additional lawful short-term debts of the borrower due for payment within the loan period (if any);

b) For the purpose of using short-term foreign loans to serve the borrower's business operations which must meet financial safety indicators under specialized laws:

The borrower declares in the list of fund usage requirements the total amount expected to be used for specific business operations based on business plans as required by specialized laws.

If there is a change in the actual usage of funds compared to the recorded value in the list of fund usage requirements due to changes in business plans, the borrower adjusts the plan for the use of foreign loans to include an updated list of fund usage requirements and add lawful purposes for using funds (if any);

c) The borrower must adjust the plan for the use of foreign loans in cases of changes to the list of fund usage requirements as stipulated in points a and b of this Clause prior to the occurrence of such changes and ensure compliance with regulations on the responsibility for storing and presenting documents for inspection and verification of the purpose of using foreign loan funds as stipulated in Clause 4 of Article 19 of this Circular.  

Article 8. Scheme for Restructuring Foreign Debt

1. The scheme for restructuring foreign debt (hereinafter referred to as "Debt Restructuring Scheme") is a compilation of information on using new foreign loans to repay existing lawful foreign loans. The Debt Restructuring Scheme of the borrower must be approved by the competent authority in accordance with the law.

2. The Debt Restructuring Scheme includes the following basic contents:

a) Information about the foreign borrower:

Information as prescribed in point a, Clause 2, Article 7 of this Circular for the borrower who is a credit institution or a foreign bank branch.

Information as prescribed in point a, Clause 3, Article 7 of this Circular for the borrower who is not a credit institution or a foreign bank branch;

b) Information about the existing foreign loan and outstanding balance: lender, amount borrowed, currency borrowed, term of borrowing, borrowing costs, purpose of borrowing, situation of capital withdrawal, repayment, outstanding balance of the loan at the time of establishing the Debt Restructuring Scheme, expected restructuring value, loan number (applicable to existing foreign loans that are medium- and long-term loans), list of short-term loan usage (applicable to existing foreign loans that are short-term loans);

c) Information about new foreign loans: lender, amount borrowed, currency borrowed, term of borrowing, borrowing costs, plan for capital withdrawal, plan for repayment of the outstanding balance of existing foreign loans;

d) Approval authority for the Debt Restructuring Scheme: approval authority, basis for determining approval authority;

đ) Other contents (if any).

Chapter II

CONDITIONSGENERAL

Article 9. Foreign Loan Agreement

1. A foreign loan agreement is one or a set of documents recording the agreement between the parties, whereby the lender transfers or commits to transfer a certain amount of money or assets (in the case of foreign loans in the form of financial lease contracts) to the borrower for use in a specific purpose within a certain period of time, with the principle of repayment of both principal and interest (if there is an agreement on interest).

2. The foreign loan agreement must be in writing; in the case of an agreement in the form of electronic data messages, it must comply with the provisions of the law on electronic transactions.

a) Short-term foreign loans provided that the disbursement of the loan takes place after the parties conclude the loan agreement;

b) Foreign loans arising from the conversion of funds for project preparation already certified by the Investment Registration Certificate into foreign loans according to the regulations of the law on foreign exchange management for foreign debt repayment activities and foreign direct investment in Vietnam.

Article 10. Currency of Foreign Loans

1. The currency of foreign loans is foreign currency.

2. Foreign loans in Vietnamese dong may only be implemented in the following cases:

a) The borrower is a microfinance organization;

b) The borrower is a foreign-invested enterprise borrowing from the profits generated from the foreign investor's direct investment activities in Vietnam, which is a shareholder in the borrower;

c) The borrower withdraws capital, repays debts in foreign currency, and the obligation of the loan is determined in Vietnamese dong.

Article 11. Secured transactions for foreign loans

The borrower and related parties shall be responsible for complying with current laws and regulations on secured transactions and other relevant legal provisions when concluding and performing secured transactions for foreign loans.

Article 12. Costs of foreign loans

1. The borrower and related parties shall be responsible for complying with current laws and regulations concerning interest rates on foreign loans and other costs related to foreign loans when agreeing on the costs of foreign loans.

2. To manage the self-borrowing and self-repayment limit for foreign loans, when necessary, the Governor of the State Bank of Vietnam shall decide on the conditions regarding the costs of foreign loans; determine and announce the ceiling on the costs of foreign loans for each period.

Article 13. Foreign borrowing by state-owned enterprises

Foreign borrowing by state-owned enterprises must be approved by the competent authority in terms of policy, reviewed, and agreed upon according to the provisions of the law on the division of responsibilities and obligations between the state owner and the state owner's representative towards state-owned enterprises, and implemented in accordance with the law on the management and use of state capital invested in production and business activities of state-owned enterprises.

Chapter III

ADDITIONAL PROVISIONS

Section 1

ADDITIONAL PROVISIONS FOR THE BORROWER ORGANIZATIONS

CREDIT INSTITUTIONS, FOREIGN BANK BRANCHES

1. Borrowers may borrow short-term and medium- and long-term foreign funds for the following purposes:

a) To supplement capital for credit activities according to the credit growth of the borrower;

b) To restructure the borrower's foreign debt;

2. When borrowing medium- and long-term foreign loans, the borrower must prove the purpose of foreign borrowing through:

a) The plan for using foreign borrowed funds as prescribed in Clause 2, Article 7 of this Circular in the case of borrowing for the purpose specified in point a, Clause 1 of this Article;

b) The debt structure plan as stipulated in Clause 8 of this Circular in cases where borrowing is for the purpose mentioned in point b, Clause 1 of this Article.

The borrower may only borrow short-term foreign loans if they meet the short-term foreign borrowing limit at the end of December of the year immediately preceding the date of the loan occurrence. The limit on short-term foreign borrowing is the maximum ratio of total principal outstanding of short-term foreign loans to individual equity, applicable to specific entities as follows:

1. 30% for commercial banks;

2. 150% for branches of foreign banks, other credit institutions.

Article 16. Safety Ratio

2. When borrowing medium- and long-term foreign loans, the borrower has the responsibility to comply with the provisions of the Law on Credit Institutions regarding safety ratios at the end of the three most recent months prior to the signing of the foreign loan agreement, the agreement to increase the value of the foreign loan until the end of the month immediately before submitting complete administrative procedures in accordance with current laws guiding the management of foreign exchange for foreign borrowing and repayment by enterprises, except in the following cases:

a) Medium- and long-term foreign loans that meet the conditions to be included in Tier 2 capital of credit institutions, branches of foreign banks, and the implementation of such loans helps these institutions comply with the safety ratio requirements;

b) The borrower who borrows abroad through issuing bonds on the international market must comply with the State Bank of Vietnam's regulations on safety ratios as stipulated in the Law on Credit Institutions at the end of the three most recent months prior to submitting the issuance registration application;

c) The borrower is a credit institution supporting under an approved recovery plan, a credit institution subject to special supervision implements the safety ratio requirements for these groups of entities as stipulated in the Law on Credit Institutions.

Section 2

SUPPLEMENTARY CONDITIONS FOR THE NON-BANKING LOAN TAKERS

AND NON-BANK BRANCHES

FOREIGN COUNTRY

Article 17. Purpose of foreign borrowing

1. Purpose of short-term foreign borrowing:

a. The borrower may only use short-term foreign borrowed funds to restructure their existing foreign debts and repay short-term debts payable in cash (excluding the principal of domestic loans) of the borrower. Short-term debts payable referred to herein are those arising from the implementation of investment projects, production and business plans, other projects of the borrower and are determined based on current laws guiding enterprise accounting systems;

b. In addition to the purpose specified in point a, Clause 1 of this Article, borrowers who must ensure financial safety indicators under specialized laws may use short-term foreign borrowed funds for their business operations with a usage period not exceeding twelve months from the date of withdrawing foreign loan funds.

2. Purpose of medium- and long-term foreign borrowing:

The borrower may only borrow medium- and long-term foreign funds for the following purposes:

a) Implementing the borrower's investment projects;

b) Implementing the borrower's production and business plans, other projects;

c) Restructuring the borrower's foreign debt.

3. The use of foreign borrowed funds by the borrower as stipulated in Clauses 1 and 2 of this Article must be consistent with:

a) The scope of business activities registered by the enterprise, the scope of establishment permits, investment certificates, investment registration certificates, approval documents for investment proposals, cooperative society registration certificates, inter-cooperative association registration certificates, or other equivalent documents according to the law;

b) Other lawful activities prescribed in current legal documents governing the charter and operation of the borrower.

4. The borrower must prove the purpose of foreign borrowing through:

a) Investment certificates, investment registration certificates, or approval documents for investment proposals as prescribed by the law on investment and relevant current laws in cases where foreign borrowing is for implementing the borrower's investment projects;

b) The plan for using foreign borrowed funds as prescribed in Clause 3 of Article 7 of this Circular in cases where foreign borrowing is for implementing the borrower's production and business plans, other projects;

c) The debt restructuring plan as prescribed in Article 8 of this Circular in cases where foreign borrowing is for restructuring the borrower's foreign debt.

Article 18. Limitations on Foreign Borrowing

1. In cases of foreign borrowing for implementing investment projects:

a) The outstanding principal balance of the borrower’s domestic and foreign medium- and long-term loans (including short-term loans extended and overdue short-term loans converted to medium- and long-term loans) serving the investment project shall not exceed the investment project's borrowing limit;

b) The borrowing limit for the investment project as specified in point a, Clause 1 of this Article is the difference between the total investment capital of the investment project and the registered investment contribution recorded in the investment certificate, investment registration certificate, or approval document for the investment proposal.

2. In cases of foreign borrowing for implementing production and business plans, other projects of the borrower:

The outstanding balance of the borrower’s domestic and foreign medium- and long-term loans (including short-term loans extended and overdue short-term loans converted to medium- and long-term loans) serving these purposes shall not exceed the total borrowing needs as stated in the approved foreign borrowing utilization plan according to the law.

3. In cases of foreign borrowing for restructuring the borrower's foreign debt:

a) The maximum amount of foreign borrowing for the purpose of restructuring foreign debt shall not exceed the total value of the outstanding principal, unpaid interest, and fees of the existing foreign debt and the fees of the new loan determined at the time of restructuring;

b) If the new foreign loan is a medium- or long-term loan, within five working days from the date of withdrawing the new loan, the borrower must repay the existing foreign debt so that after the aforementioned five working days, the borrower complies with the borrowing limits set out in Clauses 1 and 2 of this Article;

4. Short-term foreign borrowing does not need to comply with the foreign borrowing limits set out in Clauses 1 and 2 of this Article.

5. Exchange rate for calculating foreign borrowing limits:

a) For the purpose of foreign borrowing to implement investment projects, if the currency of the foreign loan differs from the currency recorded in the investment certificate, investment registration certificate, or approval document for the investment proposal, the borrower shall use the exchange rate for foreign currency accounting as announced by the Ministry of Finance (State Treasury) applicable at the time of signing the foreign loan agreements or related agreements changing the value of the loan to calculate the borrowing limit;

b) For the purpose of foreign borrowing to implement production and business plans, other projects of the borrower, if the borrowing needs in the foreign borrowing utilization plan are calculated in a different currency from the foreign loan currency, the borrower shall use the exchange rate for foreign currency accounting as announced by the Ministry of Finance (State Treasury) applicable at the time of preparing the foreign borrowing utilization plan to calculate the borrowing limit;

c) For the purpose of foreign borrowing to restructure the borrower's foreign debt, if the currency of the new foreign loan differs from the currency of the existing foreign debt, the borrower shall use the exchange rate for foreign currency accounting as announced by the Ministry of Finance (State Treasury) applicable at the time of preparing the foreign debt restructuring plan to calculate the borrowing limit.

Chapter IV. RESPONSIBILITIES OF THE PARTIES INVOLVED

Article 19. Obligations of the Borrower

1. Comply with the provisions on foreign borrowing conditions set forth in this Circular and current laws governing foreign exchange management.

2. Bear sole responsibility for complying with civil law, business law, investment law, secured transactions law, anti-money laundering law, specialized laws, other relevant legal provisions, and international customs when concluding and performing foreign loans.

3. Bear sole responsibility under the law for the accuracy and truthfulness of documents proving the purpose of foreign borrowing and ensuring the use of foreign borrowed capital in accordance with the documents proving the purpose of foreign borrowing as stipulated in Clause 2, Article 14 and Clause 4, Article 17 of this Circular.

4. Retain all evidence and documents proving the use of foreign borrowed capital in compliance with the purpose of foreign borrowing as stipulated in Article 14 and Article 17 of this Circular, evidence and documents related to changes in the list of capital usage needs (if any) as stipulated in Clause 4, Article 7 of this Circular, and provide all such documents upon request for inspection and verification of the use of foreign borrowed capital by competent authorities.

5. Prepare a record of each idle amount of money in cases where funds are deposited with terms at credit institutions, branches of foreign banks in Vietnam in accordance with the principle of capital use as stipulated in Article 6 of this Circular, and submit them together with documents proving compliance with the provisions of Article 6 of this Circular for inspection and verification of the use of foreign borrowed capital by competent authorities when necessary.

Article 20. Obligations of Banks Providing Account Services

1. Perform checks and retain appropriate evidence to ensure that foreign exchange services are provided in accordance with their intended purposes and comply with legal regulations.

2. Cooperate in providing information and documents of the borrower during the State Bank of Vietnam's inspection and verification of the borrower’s compliance with foreign borrowing conditions.

Chapter V. IMPLEMENTING PROVISIONS

Article 21. Implementation clause

1. This Circular takes effect from August 15, 2023, except as provided in Clause 2 of this Article.

2. The provisions on short-term foreign borrowing limits as stipulated in Article 15 of this Circular shall take effect from January 1, 2024.

3. Repeal Circular No. 12/2014/TT-NHNN dated March 31, 2014 of the Governor of the State Bank of Vietnam on foreign borrowing conditions for enterprises not guaranteed by the Government.

4. Amend, supplement, and repeal certain phrases, clauses, and articles of Circular No. 12/2022/TT-NHNN dated September 30, 2022 of the Governor of the State Bank of Vietnam guiding foreign exchange management for foreign borrowing and repayment by enterprises as follows:

a) Repeal Point c, Clause 3, Article 15; Clause 5, Article 15; Clause 10, Article 16; Clause 3, Article 20; and the phrase "except for foreign loans in Vietnamese dong which must be reviewed and approved by the Governor of the State Bank of Vietnam" in Point b, Clause 1, Article 20;

b) Replace the phrase "or a document proving non-compliance with the credit limit and safety ratio provisions approved by the Prime Minister or the Governor of the State Bank of Vietnam in accordance with the law (if any)" in Clause 7, Article 16 with the phrase "or a document proving that the borrower falls within the category specified in Point c, Clause 2, Article 16 of Circular No. 08/2023/TT-NHNN on foreign borrowing conditions not guaranteed by the Government";

c) Amend the Note in Appendix 02 as follows: "The borrower falling within the category specified in Point c, Clause 2, Article 16 of Circular No. 08/2023/TT-NHNN on foreign borrowing conditions not guaranteed by the Government shall clearly state the ratios not to be complied with and the time periods of non-compliance with the safety ratios in the operations of credit institutions, branches of foreign banks".

Article 22. Transitional provisions

Foreign loan agreements concluded before the effective date of this Circular and in compliance with the law at the time of conclusion may continue to be implemented according to the signed agreements and the registration confirmation documents, and registration change confirmation documents for foreign loans issued by the State Bank of Vietnam (if any) until the end of the foreign loan period. Any amendments and supplements to these agreements can only be made if the amended and supplemented contents comply with the provisions of this Circular and relevant laws.

Article 23. Implementation Organization

The Heads of the Office, Department Heads of the State Bank of Vietnam, Heads of units under the State Bank of Vietnam, Governors of the State Bank of Vietnam branches in provinces and centrally-administered cities, credit institutions, branches of foreign banks, enterprises, cooperatives, and cooperative federations are responsible for implementing this Circular.