Directive No. 139-NH/CT Regarding Calculation and Collection of Interest on Loans

 DIRECTIVE

REGARDING THE CALCULATION AND COLLECTION OF INTEREST ON LOANS

The calculation and collection of interest on loans recently have many issues, primarily that borrowing units do not repay principal and interest according to the agreed terms, do not deposit money into the Bank, and lack means for payment, thus the Bank cannot collect interest. As a result, some Banks have included interest in the principal (which in fact has not been collected); some Bank staff, when collecting debts, do not distinguish between principal and interest but include them in the repayment of principal, leaving interest unpaid. These actions have caused losses to the Banking sector in terms of assets and disorder in accounting (including economic units). Following Directive No. 95/NH-CT dated July 1, 1989, the General Director of the State Bank of Vietnam now draws attention and requests the General Directors of specialized commercial banks, Branch Directors of the State Bank, and all levels of specialized commercial banks to implement the calculation and collection of credit interest as follows:

The calculation and collection of interest on loans must be carried out according to regulations:

1.1. For outstanding loan balances at agreed interest rates for state-owned and collective economies, and rediscounting loans for specialized commercial banks, interest should be calculated and collected simultaneously with the collection of due principal; if the borrower's ability to repay (both principal and interest) is less than the amount of due debt, then calculate and collect a portion of the principal plus interest corresponding to the principal collected this time and matching the repayment capacity; the remaining principal should be transferred to overdue debt or extended according to the loan regulations.

1.2. For outstanding balances on ordinary loan accounts for state-owned, collective, private, and individual economic units (excluding loans at agreed interest rates and rediscounting mentioned in Point 1.1), interest should be calculated using the accumulation method and collected monthly on the last day of each month.

1.3. For outstanding balances on circulating loan accounts, interest should be calculated using the accumulation method and collected monthly on the last day of each month. Two cases need to be distinguished:

a) If lending is conducted under the "One Account" format, when collecting interest, it is permissible to debit the loan account as in the case of business operation costs (since gross profit is not transferred to the deposit account);

b) If lending is conducted under the "Two Accounts" format, when collecting loan interest, it must be deducted from the borrower's deposit account; if the deposit account lacks the ability to pay, the required interest should be recorded off-balance sheet, closely monitoring the deposit account to collect when funds are available, without imposing penalties at the overdue interest rate for the pending interest to be collected.

c) The calculation and collection of interest on loans between the State Bank and specialized commercial banks also follow the above principles.

2. The application of preferential interest rates, special preferential interest rates, and exemption from interest must comply with current regulations. Any individual or level that makes incorrect decisions or exceeds authority causing losses must bear responsibility for compensation upon discovery; if done intentionally, they shall be subject to administrative sanctions or prosecution. Special preferential interest rates (2.1% per month) for loans made in accordance with regulations, with a maximum term not exceeding December 31, 1989, must be corrected to the regular interest rate for loans made in accordance with regulations but not fully repaid by January 1, 1990.

3. Adjust quarterly financial plans to better reflect the characteristics of credit operations and eliminate the practice of setting average collection targets.

From now on, do not include interest in the principal when the borrowing unit does not have funds in the deposit account or lacks the immediate ability to deposit funds to pay interest. If any unit deliberately avoids paying interest on borrowed funds, handle it according to credit regulations (limiting or suspending new loans).

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