Directive No. 09/CT-NH1 on handling specific issues regarding credit conditions and procedures

DIRECTIVE

Handling specific issues regarding credit conditions and procedures

Bank credit operations in recent times have achieved certain progress and results, contributing to promoting production and economic growth. Phenomena of lending contrary to principles and regulations, with low efficiency, are gradually being addressed.

However, in the first six months of 1997, credit growth was slow, only reaching 30% of the annual plan, and overdue debts continued to increase. Part of the reasons for this are unresolved issues concerning credit conditions and procedures.

To continue to promote credit work and contribute to boosting production and economic growth, while ensuring compliance with established regulations, guaranteeing the safety and effectiveness of loan capital, and limiting overdue debts, the Governor of the State Bank issues the following directives:

1. Regarding the determination of loan terms:

1.1. Short-term loans: The loan term shall be implemented according to Article 9 of the Short-term Credit Regulations issued together with Decision 198/QĐ-NH1 dated September 16, 1994 of the Governor of the State Bank, which states that "the term should be appropriate to the characteristics of the borrower's capital turnover, but not exceeding 12 months."

1.2. Medium and long-term loans: The loan term shall be determined according to Article 10 of the Medium and Long-term Credit Regulations issued together with Decision 367/QĐ-NH1 dated December 21, 1995 of the Governor of the State Bank and Clause 2 of Article 1 of Decision 200/QĐ-NH1 dated June 28, 1997 of the Governor of the State Bank.

2. Regarding debt extension.

2.1. Extension of short-term debt must comply strictly with Clause 4 of Article 1 of Decision 199/QĐ-NH1 dated June 28, 1997 of the Governor of the State Bank: "debt collection shall be carried out according to the repayment period stated on the promissory note. The borrower may repay the debt ahead of schedule and must proactively repay the debt to the credit organization when due as stipulated in Article 13 of these regulations. In cases where the borrower fails to repay the debt on time due to objective reasons, if there is a written explanation requesting an extension of the debt, the credit organization will consider extending the debt based on the actual difficulties, with the total extension period not exceeding one production cycle of the borrowing entity. For cases of difficulties caused by changes in state policies or force majeure, the credit organization may consider extending the debt for a longer period, but the total extension period shall not exceed 12 months."

This new regulation on debt extension does not limit the number of extensions and extends the debt extension period, aiming to create favorable conditions for banks and borrowers to overcome difficulties due to objective reasons and repay the debt. If the borrower misuses the loan funds, they will not be considered for debt extension.

2.2. Debt extension for medium and long-term loans must be implemented in accordance with Clause 6 of Article 1 of Decision 200/QĐ-NH1 dated June 28, 1997 of the Governor of the State Bank.

Dividing the repayment period into longer or shorter terms depends on the agreement between the lender and borrower based on the loan term and the borrower's ability to generate repayment sources. At the end of the loan term, if the borrower encounters difficulties due to objective reasons and cannot repay the debt, the lender can extend the term further without limiting the number of extensions, but the total extension period shall not exceed one-third of the initial loan term as specified in the original credit commitment contract.

During the debt extension process, if the loan term is extended, the credit organization may negotiate with the borrower to adjust the repayment periods accordingly.

3. Regarding approval of business plans by borrowing units.

The requirement for Ministries and sectors (for central state-owned enterprises) or People's Committees of provinces and centrally-administered cities (for local state-owned enterprises) to approve business plans of enterprises applies only to state-owned enterprises that have incurred losses in previous years but have not been resolved, providing the bank with grounds to consider and decide on lending (this is not applicable in all cases or for all loans as per Point 1.3 of Circular 417/CV-NH14 dated May 31, 1997 and Circular No. 214/CV-TD2 dated July 16, 1997 guiding the implementation of Point 1.3 of Circular 417/CV-NH14).

4. Regarding lending to agricultural households (including households engaged in agriculture, forestry, fisheries, and salt production).

4.1. Regarding debt relief for agricultural households facing difficulties: For old debts already lent to agricultural households facing difficulties due to objective reasons such as natural disasters, epidemics, price drops, and other objective factors, commercial banks shall handle them as follows:

a. Debts due for repayment (including those already extended) may be further extended by up to one production cycle for short-term debts and up to one-third of the initial loan term for medium and long-term debts.

b. In cases of overdue debts, commercial banks may consider lending again if the production household has a need for working capital and the ability to repay the debt.

4.2. Temporarily, to reduce the difficulty of loan procedures for agricultural households while still ensuring the safety of loan capital, the General Director (Director) of credit organizations may determine the maximum loan amount for each agricultural household without requiring collateral, pledge, or guaranty, based on the borrower's repayment capacity as confirmed by the People's Committee of the commune, ward, or town (collectively referred to as the People's Committee at the commune level), consistent with the operational characteristics of credit organizations and the difficult conditions of agricultural households in different regions.

Re-evaluating the debt term for existing loans

The review and re-evaluation of the debt term must start from the characteristics of the capital turnover of the loan, based on the borrower's proposal, and credit institutions must ensure alignment with the nature of the medium and long-term loan capital as currently regulated.

5.1. For medium-term and long-term investment targets, if short-term loans have been issued due to various reasons, a review shall be conducted. If these loans are deemed effective and meet the conditions for medium-term and long-term loans, they shall be converted to medium-term and long-term loans. The existing loan files shall be retained and necessary documents shall be supplemented to comply with the conditions for medium-term and long-term loans. The loan term shall be calculated from the date the first loan amount was disbursed.

For loans that are deemed ineffective and do not meet the conditions for medium-term and long-term loans, active measures must be taken to recover the debt upon maturity.

5.2. For medium-term loans previously applied with terms according to Clause 7, Article 1 of Decision No. 367/QĐ-NH1 dated December 21, 1995 of the Governor of the State Bank, if the debt has not been fully recovered and there is difficulty in repaying within the loan term, including cases where the loan term has been extended or the loan has become overdue, the loan term may be reconsidered and adjusted to suit the borrower's production and business conditions but within the scope of the medium-term loan term stipulated in Decision No. 200/QĐ-NH1 dated June 28, 1997 of the Governor of the State Bank.

If the loan is being normally recovered and it is possible to repay the full debt within the loan term (including cases where the loan term has been extended or the loan has become overdue), there is no need to reconsider the loan term.

5.3. For short-term loans where the borrower uses the borrowed capital for medium-term or long-term investment targets, credit organizations shall examine each case individually. If state-owned enterprises engaged in production and business operations are effective, such loans can be converted to medium-term or long-term loans (including cases where the loan has become overdue) in accordance with the directive of the Prime Minister in Circular No. 3617/KTTH dated July 21, 1997. Procedures for loan files and loan terms when converting to medium-term or long-term loans shall be carried out as stipulated in Point 5.1 above.

5.4. Regarding interest rates on loans whose terms have been redefined and converted to different types of loans as prescribed in Points 5.1 to 5.3 of this Directive, in all cases of redefining loan terms and converting loan types, the applicable interest rate shall be the current lending interest rate as prescribed by the Governor of the State Bank, consistent with the new type of loan from the date of redefining the loan term and converting to the new loan. Prior to this date, the existing interest rate shall remain unchanged, including overdue interest rates.

5.5. Regarding accounting entries: when converting loan types, the correct accounting entries shall be made according to the new type of loan after conversion. The Accounting and Finance Department of the State Bank shall be responsible for guiding commercial banks and credit organizations on accounting entries when adjusting loan types.

6. Implementation.

The Chairman of the Board of Directors and General Director (Director) of credit organizations shall be responsible for guiding and strictly implementing this Directive and reporting to the Governor of the State Bank (through the Economic Research Department) on the implementation results in two phases: the first phase by September 30, 1997, and the second phase by November 30, 1997. The Chief Inspector of the State Bank, the Director of the State Bank Branches in provinces and cities shall be responsible for supervising and inspecting the implementation of this Directive.

During the implementation process, any difficulties encountered shall be reported to the Central State Bank for consideration and resolution.