Directive No. 12/CT-NH4 on strengthening capital sources for medium-term loans in the fourth quarter of 1996 in accordance with the Government's policy

DIRECTIVE

REGARDING THE INCREASE OF FUNDS FOR MEDIUM-TERM LOANS IN THE FOURTH QUARTER OF 1996 ACCORDING TO THE GOVERNMENT'S POLICY

The Prime Minister decides to assign the banking sector in the fourth quarter of 1996 to increase additional medium-term loan funds according to projects aimed at modernizing equipment, deepening investment, and serving the country's economic development goals, and permits banks to use up to 20% of short-term mobilized capital to meet these objectives.

To implement the above policy, the Governor of the State Bank issues specific instructions for commercial banks and development banks to carry out as follows:

1- Commercial banks and development banks (hereinafter referred to as Banks) need to further expand capital mobilization to enhance their ability to supply capital to the economy. In addition to directing regular business activities according to the fourth quarter of 1996 tasks, each bank must immediately implement the use of additional short-term capital to increase medium-term loans according to the state's policy. The additional loan amount for each bank in the fourth quarter of 1996 is determined based on taking 20% of the total short-term credit capital minus the amount already lent for medium-term loans by the end of September 1996. This capital will be lent by the banks for the following types of projects:

- Projects designated by the Government (the Ministry of Planning and Investment, authorized by the Government, will announce the list of projects through the State Bank, with a total capital ranging from 26,000 to 30,000 billion VND);

- Projects selected and considered for lending by the banks, approximately 26,000 billion VND.

2- The responsibility of the banks is to strengthen capital mobilization efforts to increase credit sources, creating conditions for implementing medium-term loan plans, especially projects designated by the Government.

3- Some points on the application of principles and conditions for lending:

Banks lend according to the current medium-term credit regulations of the State Bank. Loans are only provided for projects determined to have economic efficiency, meeting borrowing conditions, and having the ability to repay principal and interest on time. Below are some points permitted when implementing lending.

a) Regarding the term of lending: Depending on the project requesting a loan and the borrower's repayment capacity, the General Director (Director) of the Bank will consider and decide the term of lending, but the maximum term for lending a project shall not exceed five years. Enterprises must comply with all regulations of the Bank when borrowing, particularly the borrowing and repayment conditions.

b) Regarding the amount of lending for each project: For projects designated by the Government, banks are allowed to lend according to the investment capital determined for that project. For projects directly selected by the bank, if the loan amount required for a project exceeds 10% of its own capital and reserve fund, a detailed report must be submitted to the State Bank (Department of Financial Institutions) for review and approval.

c) Handling cases of difficult-to-collect debts: Banks do not lend to enterprises with overdue debts exceeding six months. Cases of normal overdue debts and new projects determined to be economically viable are still considered for lending.

d) The additional medium-term credit surplus does not count within the credit limit for the fourth quarter of 1996.

4- Borrowing targets:

- Banks lend to projects aimed at modernizing equipment, expanding production, and all economic sectors (other cases already have long-term capital resolved by the Development Bank and the Investment Development General Department).

- Borrowing projects must be good projects that can effectively utilize economic benefits and definitely repay principal and interest.

5- Interest rates for loans:

Banks base their medium-term loan interest rates on the source of capital mobilized and the interest rate for capital mobilization, but the maximum loan interest rate shall not exceed the ceiling set by the Governor of the State Bank for medium-term loan interest rates.

Projects listed in the Government-designated catalog will be subsidized by the Ministry of Finance for the difference between the medium-term loan interest rate and the investment loan interest rate of 1.1% per month according to a mechanism jointly proposed by the Ministry of Planning and Investment, the Ministry of Finance, and the State Bank to the Government.

6- Issues related to payment capability support:

In case banks encounter sudden difficulties in capital sources for payments due to using part of short-term capital for medium-term loans, the State Bank will provide loans to temporarily resolve payment difficulties. The State Bank will examine each specific case to provide refinancing on a designated basis (without collateral documentation). The refinancing interest rate will be decided specifically by the Governor of the State Bank.

7- Based on the guidance of the State Bank, it is requested that banks urgently implement this to their branch banks to start carrying out in the first days of the fourth quarter of 1996. Special attention should be given to implementation at the management level and grassroots economic units; actively guide on operations and cooperate in building and reviewing projects to facilitate loan implementation.

8- Directors of provincial and centrally-administered city branches of the State Bank need to coordinate with directors of commercial bank and development bank branches to implement medium-term lending according to the State Bank's regulations and the instructions of the General Director (Director) of commercial banks and development banks on each local area.

The above are specific provisions regarding the implementation of using additional short-term capital for medium-term loans according to the Government's policy in the fourth quarter of 1996. It is required that commercial banks, development banks, provincial and centrally-administered city branches of the State Bank, and related units strictly implement these requirements. On the 15th of each month, banks must report progress and results of implementation to the State Bank (Credit Department) according to Model 01/BCN attached (Model 01/BCN and guidelines for loan quotas for projects selected and reviewed by banks are also attached).