Decision No. 127/2005/QD-NHNN on amending and supplementing certain provisions of the Regulation on lending by credit institutions to customers issued pursuant to Decision No. 1627/2001/QD-NHNN dated December 31, 2001 of the Governor of the State Bank of Vietnam.

DECISION OF THE GOVERNOR OF THE STATE BANK OF VIETNAM

Regarding amendments and supplements to certain provisions of the Regulation on lending by credit institutions to customers issued pursuant to Decision No. 1627/2001/QĐ-NHNN

dated December 31, 2001 of the Governor of the State Bank of Vietnam

On December 31, 2001

GOVERNOR OF THE STATE BANK OF VIETNAM

- Pursuant to the Law on the State Bank of Vietnam No. 01/1997/QH10 dated December 12, 1997 and the Law Amending and Supplementing Certain Provisions of the Law on the State Bank of Vietnam No. 10/2003/QH11 dated June 17, 2003;

- Pursuant to the Law on Credit Institutions No. 02/1997/QH10 dated December 12, 1997 and the Law Amending and Supplementing Certain Provisions of the Law on Credit Institutions No. 20/2004/QH11 dated June 15, 2004;

- Pursuant to Decree No. 86/2002/NĐ-CP dated November 5, 2002 of the Government stipulating the functions, tasks, powers, and organizational structure of ministries and ministerial-level agencies;

- Based on Decree No. 52/2003/NĐ-CP dated May 19, 2003 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 Monetary Policy Department,

DECISION:

Article 1. Amending and supplementing certain provisions of the Regulation on lending by credit institutions to customers issued pursuant to Decision No. 1627/2001/QĐ-NHNN dated December 31, 2001 of the Governor of the State Bank of Vietnam as follows:

1. Clause 2, Article 2 shall be amended and supplemented as follows:
"2. Borrowers at credit institutions are organizations and individuals from Vietnam and abroad with capital needs for implementing investment projects, production plans, business operations, services, or living support projects both domestically and internationally. In cases where borrowers seek capital for implementing investment projects, production plans, business operations, or services abroad, the State Bank of Vietnam shall have separate regulations."

2. Clause 4 and Clause 5 of Article 3 are amended and supplemented as follows:
"4. Restructuring the repayment term is the act of credit institutions adjusting the repayment period, extending loans for customers' debts according to two methods:
a) Adjusting the repayment period means that credit institutions agree to change the repayment period for principal and/or interest within the agreed loan term in the credit contract, without changing the final repayment period.
b) Extending the loan repayment period means that credit institutions agree to extend the repayment period for principal and/or interest beyond the agreed loan term in the credit contract."

3. Clause 6 of Article 3 is amended and supplemented as follows:
"6. Investment projects, production plans, business operations, services, or living support projects submitted by borrowers to credit institutions are a set of proposals including capital requirements, borrowing conditions, methods of using capital, and methods of repaying borrowed capital over a specified period."

4. Clause 2 of Article 13 is amended and supplemented as follows:
"2. For overdue loans that credit institutions assess as unable to repay on time and do not approve restructuring of the repayment term, the outstanding principal balance of the credit contract is considered overdue debt, and the credit institution implements measures to recover the debt; late payment penalties for overdue debt and interest on borrowed capital are agreed upon by both parties based on legal provisions. The credit institution classifies the entire outstanding principal balance of the borrower with overdue debt into appropriate loan accounts according to the State Bank of Vietnam's regulations."

5. Article 21 is amended as follows:
"Article 21. Monitoring of Borrowed Capital
1. Credit institutions have the responsibility and right to monitor the borrowing process, use of borrowed capital, and repayment by borrowers.
2. Credit institutions establish procedures and implement monitoring of the borrowing process, use of borrowed capital, and repayment by borrowers in accordance with their operational characteristics and the nature of the loan, ensuring efficiency and the ability to recover borrowed capital; they submit the monitoring procedures for borrowed capital to the Inspectorate of the State Bank of Vietnam."

6. Article 22 is amended as follows:
b) If the borrower is unable to fully repay the principal and/or interest within the agreed loan term in the credit contract and the credit institution assesses that the borrower has the ability to repay within a certain period after the loan term, the credit institution may consider extending the debt with a suitable term corresponding to the borrower's source of repayment.
1. Credit institutions independently decide on restructuring the repayment term based on their financial capacity and the assessment of the borrower's repayment capability. The entire outstanding principal balance of borrowers whose loan repayment terms have been restructured is considered overdue and classified into groups 2 to 5 according to the State Bank of Vietnam's classification regulations:
a) If the borrower is unable to repay the principal and/or interest within the agreed loan term in the credit contract but is assessed by the credit institution as capable of repaying in subsequent periods, the credit institution may consider adjusting the repayment period for principal and/or interest. The entire outstanding principal balance of such borrowers is classified into groups 2 to 4.
b) If the borrower is unable to fully repay the principal and/or interest within the agreed loan term in the credit contract but is assessed by the credit institution as capable of repaying within a specific period after the loan term, the credit institution may consider extending the loan repayment period appropriately based on the borrower's repayment sources. The entire outstanding principal balance of such borrowers is classified into groups 3 to 5.
2. Credit institutions must issue regulations on restructuring the repayment term in accordance with the State Bank of Vietnam's regulations; the delegation of authority to branches to decide on restructuring the repayment term must ensure that the headquarters promptly, comprehensively, and accurately understands all restructured loan balances within the system. Credit institutions must submit the regulations on restructuring the repayment term to the Inspectorate of the State Bank of Vietnam immediately after issuance.
3. For loans that have had their repayment terms restructured, credit institutions must report in accordance with the State Bank of Vietnam's reporting and statistical system applicable to credit institutions."

7. Clause 1 of Article 23 is amended as follows:
"1. Borrowers who suffer asset losses leading to financial difficulties;"

Article 2. The term "legal entity" in Article 7 and Article 10 of the Regulation on lending by credit institutions to customers issued pursuant to Decision No. 1627/2001/QĐ-NHNN dated December 31, 2001 of the Governor of the State Bank of Vietnam is replaced by the term "organization"..

Article 3. Periodically, credit institutions shall classify customer loans based on the loan repayment status, business operation results, financial capacity, and debt repayment ability of borrowing customers according to the State Bank of Vietnam's regulations on loan classification, provision establishment, and utilization for risk management in credit institution operations.

Article 4. This Decision takes effect fifteen days after its publication in the Official Gazette. The provisions in the following documents are hereby abolished: Decision No. 688/2002/QĐ-NHNN dated July 1, 2002 of the Governor of the State Bank of Vietnam on implementing overdue loan transfers for customer loans at credit institutions; Circular No. 405/NHNN-CSTT dated April 16, 2002 on guiding the implementation of overdue loan transfer regulations; Circular No. 950/NHNN-CSTT dated September 3, 2002 on overdue loan transfers for cases of delayed principal and interest payments; Circular No. 1140/NHNN-CSTT dated September 29, 2003 on applying overdue loan interest rates and the time for calculating overdue loan interest; other provisions contrary to this Decision.

Article 5. Heads of units under the State Bank of Vietnam, Directors of provincial and centrally-administered city branches; Boards of Directors and General Managers (Directors) of credit institutions are responsible for implementing this Decision./.