CIRCULAR

HIMPLEMENTATION GUIDELINES N |||DECREE NO. 48/2001/CP- dated October 20, 2015 of AUGUST 13, 2001 OF CTHE GOVERNMENT ON THE ORGANIZATION

AND OPERATIONS OF Article 24RURAL CREDIT FUNDS

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On August 13, 2001, the Government issued Decree No. 48/2001/NĐ-CP on the organization and operations of Rural Credit Funds. The State Bank of Vietnam hereby provides guidance on implementing certain specific points as follows.

I - GENERAL PROVISIONS

1. SCOPE OF REGULATION.

1.1. This Circular guides the implementation of certain points not specifically provided for in Decree No. 48/2001/NĐ-CP dated August 13, 2001 of the Government on the organization and operations of Rural Credit Funds.

1.2. The following contents have separate guidance: Issuance and revocation of establishment and operation permits; lending by Rural Credit Funds to customers; collateral for loans; safety ratios in operations; accounting systems; financial systems; classification of "Assets"; provision for and use of reserves to address risks; standards for members of the Board of Management, members of the Supervisory Board, and managers; special supervision; lending systems; auditing; establishment and use of sources for liquidity reserves; establishment and use of system safety funds; rating and classification; information and reporting systems.

2. Scope of application.

This Circular applies to grassroots People's Credit Funds, central People's Credit Funds (hereinafter collectively referred to as People's Credit Funds).

3. NAME AND LOGO.

3.1. The name of the Rural Credit Fund shall be decided by the Founding Assembly (for newly established Rural Credit Funds) or the Member General Meeting (for currently operating Rural Credit Funds), but must include the phrase "Rural Credit Fund".

3.2. Rural Credit Funds uniformly use a common logo reflecting the strength of the system: The logo consists of three overlapping letters QTD and an image of rice stalks.

II. RURAL CREDIT FUND AT THE COMMUNE LEVEL

1. AREA OF OPERATION.

1.1. Rural Credit Funds at the commune level mainly operate within the territory of one village, one ward, or one town (hereinafter referred to collectively as village).

1.2. For Rural Credit Funds at the commune level organized across villages, they must be contiguous villages within the same district, county, or city where the main office of the Rural Credit Fund at the commune level is located, and must obtain the approval of the People's Committee of the home village and related villages; however, this must be consistent with the management capacity of the Rural Credit Fund at the commune level and the supervisory capacity of the State Bank.

1.3. Special cases:

a. For Rural Credit Funds at the commune level organized across villages and urban Rural Credit Funds established during the pilot period, if their area of operation does not comply with the provisions of Point 1.2 above, the Director of the Branch of the State Bank of Vietnam in the province or city will review and adjust the area of operation based on specific conditions in the locality, ensuring it is consistent with the management capacity of the Rural Credit Fund at the commune level and the supervisory capacity of the State Bank.

b. For Rural Credit Funds at the commune level operating according to industry or business on the provincial or municipal level established during the pilot period, the Director of the Branch of the State Bank of Vietnam in the province or city will review and adjust the area of operation based on the economic and social characteristics of the locality, ensuring it is consistent with the management capacity of the Rural Credit Fund at the commune level and the supervisory capacity of the State Bank.

2. MEMBERS.

2.1. Members of Rural Credit Funds at the commune level include:

a. Individuals who are Vietnamese citizens aged 18 or older with full civil capacity and permanent residence registration within the area of operation of the Rural Credit Fund at the commune level. Individuals with assets, production and business organizations, and temporary residence registration within the area of operation of the Rural Credit Fund at the commune level may also be considered for membership;

b. Households appoint representatives meeting the conditions and criteria to become members of the Rural Credit Fund at the commune level;

c. Cooperatives and cooperative groups with headquarters located within the area of operation of the Rural Credit Fund at the commune level, appoint legitimate representatives to join as members of the Rural Credit Fund at the commune level;

Individuals and entities specified in points a, b, and c above voluntarily join, agree to the Charter, and contribute sufficient capital, can become members of the Rural Credit Fund at the commune level.

d. Political and social organizations that are members of the Rural Credit Fund at the commune level during the pilot period may continue to maintain their member status. The Rural Credit Fund at the commune level shall not develop new members from this category.

2.2. Members contribute capital in accordance with the Charter; the minimum capital contribution of each member (including transferred capital) is 50,000 VND (Fifty thousand dong), but the maximum shall not exceed 30% (thirty percent) of the total Charter Capital of the Rural Credit Fund at the commune level at the time of contribution and transfer.

2.3. When leaving the Rural Credit Fund at the commune level, members may transfer their contributed capital, rights, and obligations to another person. In case a member leaves the Rural Credit Fund at the commune level due to loss of civil capacity, relocation outside the area of operation of the Rural Credit Fund at the commune level, or being expelled, if the capital contribution cannot be transferred to another person, the capital contribution will be refunded; the refund of capital contribution and interest on the capital contribution (if any) must be based on the financial status of the Rural Credit Fund at the commune level when finalizing the year-end settlement.

a. Members are entitled to a refund of their capital contribution after fully settling all financial obligations (if any) towards the Rural Credit Fund at the commune level, including:

- Repayment of loan amounts (both principal and interest);

- Losses that must be compensated due to responsibility or joint liability;

- Business losses and operational risks corresponding to the proportion of capital contribution that the member shares responsibility for, as decided by the Member General Meeting.

b. Upon leaving the Rural Credit Fund at the commune level, members are entitled to benefits from the reward fund and welfare fund according to the proportion of their capital contribution as decided by the Member General Meeting.

3. ORGANIZATION, MANAGEMENT, SUPERVISION, AND OPERATIONS.

3.1. Rural Credit Funds with 100 members or more may organize a Member Representative Assembly. The election of representatives and the number of representatives attending the Member Representative Assembly shall be decided by the Board of Management of the Rural Credit Fund at the commune level.

3.2. The Board of Directors has the authority to decide on increasing or decreasing the charter capital up to a maximum of 10% compared to the total charter capital of the grassroots credit cooperative, but not exceeding 50 million VND, and must compile a report to be submitted to the branch of the State Bank of Vietnam in the province/city and reported to the nearest General Assembly of Members. In cases where the increase or decrease in charter capital exceeds the aforementioned limit, it must be approved by the General Assembly of Members and in writing by the branch of the State Bank of Vietnam in the province/city.

3.3. The Chairman of the Board of Directors of the grassroots credit cooperative may concurrently serve as the Director of the grassroots credit cooperative. Such concurrent service shall be regulated by the Charter of the grassroots credit cooperative and only implemented for grassroots credit cooperatives with operating capital under 2,000,000,000 VND (two billion VND).

3.4. Supervision:

a. For grassroots credit cooperatives with less than 500 members and operating capital under 2,000,000,000 VND (two billion VND), only one full-time supervisor may be elected.

b. The head and members of the Supervisory Board shall receive remuneration as decided by the General Assembly of Members. Full-time supervisors shall receive salaries equivalent to those of employees of the grassroots credit cooperative.

3.5. Grassroots credit cooperatives are permitted to open transaction points within their operational area. Opening such transaction points must be approved by the People's Committee of the commune where they are located and in writing by the branch of the State Bank of Vietnam in the province/city.

4. Contents of activities of the grassroots credit cooperative.

4.1. Capital mobilization.

a. Grassroots People's Credit Funds can mobilize capital from organizations and individuals within their operational area in the form of demand deposits and term deposits.

Grassroots credit cooperatives may accept deposits from organizations and individuals outside their operational area up to a maximum of 30% of the total deposit balance. The maximum ratio of accepting deposits from outside the operational area will be adjusted based on the quality of operations of the grassroots credit cooperatives. The maximum amount of deposits accepted from one organization or individual outside the operational area shall be equal to the amount covered by the Deposit Insurance Corporation of Vietnam. For grassroots credit cooperatives with weak performance (classified as category D or having overdue loans exceeding 5% of total outstanding loans), the Director of the branch of the State Bank of Vietnam in the province/city may consider and decide to reduce the ratio of accepting deposits from outside the operational area or terminate the acceptance of deposits from outside the operational area for such grassroots credit cooperatives.

b. Grassroots credit cooperatives may borrow funds from the Central Credit Cooperative and other financial institutions (excluding grassroots credit cooperatives) to meet the capital needs of their members and ensure the ability to pay deposits to customers.

4.2. Utilization of capital.

a. Credit activities:

- Grassroots credit cooperatives may lend to customers:

+ To members.

+ To poor households that are not members residing within the operational area of the grassroots credit cooperative. Loans to poor households must be based on the provisions of the Charter of Operations and the current financial capacity of the grassroots credit cooperative. Poor households must be evaluated according to the criteria of the Ministry of Labor, Invalids and Social Affairs and listed in the poor household list of the People's Committee of the commune, ward. Procedures, formalities, and loan application documents for poor households shall be carried out according to the current credit regulations. The outstanding loan balance to non-member poor households shall not exceed 10% of the total outstanding loan balance of the grassroots credit cooperative.

+ To non-member customers in the form of collateralized savings certificates issued by the grassroots credit cooperative itself, the maximum loan amount plus accrued interest at maturity shall not exceed the remaining balance of the savings certificate at the time of the loan decision. Procedures, formalities, and loan application documents shall be carried out according to the current credit regulations.

- Grassroots credit cooperatives may engage in other credit activities when permitted by the State Bank of Vietnam.

- Loan limits: The total outstanding loan balance to a single customer shall not exceed 15% of the grassroots credit cooperative's own capital, this limit does not apply to loans from entrusted capital sources of other organizations and individuals and loans collateralized from savings certificates issued by the grassroots credit cooperative itself.

b. Other activities:

- Grassroots credit cooperatives may use their own capital to purchase and invest in fixed assets serving their operations according to the principle that the residual value of fixed assets shall not exceed 50% of the grassroots credit cooperative's own capital.

- Capital contribution: Grassroots credit cooperatives may use the charter capital and the supplementary capital reserve fund to contribute capital to the Central Credit Cooperative. The level of capital contribution is determined by the General Assembly of Members of the Central Credit Cooperative, but shall not exceed 10,000,000 VND (ten million VND).

- Grassroots credit cooperatives may carry out payment services, act as agents, and handle entrusted transactions in the monetary field when permitted in writing by the State Bank of Vietnam.

4.3. Grassroots credit cooperatives must submit reports as prescribed in Article 56 of Decree No. 48/2001/NĐ-CP dated August 13, 2001, to the branch of the State Bank of Vietnam in the province/city; the branch of the State Bank of Vietnam in the province/city shall compile the report to be submitted to the State Bank of Vietnam (Department of Cooperative Financial Institutions) in accordance with current regulations.

III - CENTRAL CREDIT COOPERATIVE

1. Members of the Central Credit Cooperative include.

a. Grassroots credit cooperatives;

b. Financial institutions;

c. Economic organizations operating in the province/city where the Central Credit Cooperative is headquartered.

The above entities may voluntarily join, agree to the Charter, and contribute sufficient capital to become members of the Central Credit Cooperative.

2. Contents of activities.

2.1. The Central Credit Cooperative mainly lends to its members. Lending to non-members is regulated by the Charter of the Central Credit Cooperative. The total outstanding loan balance to non-members (excluding loans from entrusted capital sources) shall not exceed 30% of the Central Credit Cooperative's total operating capital.

2.2. Limit on loans: The total outstanding loan balance for a single customer shall not exceed 15% of the Central Credit Cooperative Fund's own capital, except for loans from entrusted funds of other organizations and individuals and collateralized loans from deposit certificates issued by the Central Credit Cooperative Fund itself.

2.3. The Central Credit Cooperative Fund may use its own capital to invest in purchasing fixed assets for operational purposes, provided that the residual value of the fixed assets does not exceed 50% of the Fund's own capital.

3. The Central Credit Cooperative Fund operates primarily to support and enhance the operational efficiency of member grassroots credit cooperatives. Until a development organization is established to link the system, the Central Credit Cooperative Fund shall perform the following tasks:

3.1. Serve as the focal point for capital coordination, payment processing, and provision of services requested by grassroots credit cooperative members.

3.2. Exchange information, share experiences, and provide advisory services to grassroots credit cooperative members regarding organizational structure, management, and operation;

3.3. Manage safety funds for the credit cooperative system in accordance with the regulations of the State Bank of Vietnam.

3.4. Represent the credit cooperative system in receiving capital from domestic and international organizations.

3.5. Train and guide certain business operations for credit cooperative staff.

4. The Central Credit Cooperative Fund must report in accordance with Article 56 of Decree No. 48/2001/NĐ-CP dated August 13, 2001, to the State Bank of Vietnam (Department of Cooperative Credit Organizations) as currently prescribed.

IV- IMPLEMENTATION

1. This Circular shall take effect fifteen days from the date of signature. All previous provisions contrary to this Circular are hereby abolished.

2. By June 30, 2002, all credit cooperatives must:

a. Complete the establishment and approval of the Articles of Association at the Members' Congress in compliance with Government Decree No. 48/2001/NĐ-CP and the guidelines issued by the State Bank;

b. Obtain the State Bank's approval of the Articles of Association;

c. Request and obtain the State Bank's issuance or adjustment of the establishment and operation license if there are changes to the contents of the license.

3. By December 31, 2002, all credit cooperatives must adjust their operating areas, organizational structures, and operational content to comply with Government Decree No. 48/2001/NĐ-CP, the provisions of this Circular, and the implementation guidelines issued by the Governor of the State Bank.

4. The Director of the Office, the Head of the Department of Cooperative Credit Organizations, the Heads of relevant units under the State Bank, the Branch Governors of the State Bank in provinces and centrally-administered cities, the Chairmen of the Management Boards, and the General Directors (Directors) of credit cooperatives are responsible for implementing this Circular.

During the implementation process, any difficulties should be promptly reported to the State Bank for guidance and resolution.