Circular No. 161/2010/TT-BTC guiding the implementation of the regulation on handling risky debts of the Social Policy Bank issued pursuant to Decision No. 50/2010/QĐ-TTg dated July 28, 2010 of the Prime Minister.

CIRCULAR

Guidelines for Implementing the Regulation on Handling Risky Debts of the Vietnam Social Policy Bank

issued together with Decision No. 50/2010/QĐ-TTg dated July 28, 2010 of the Prime Minister

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Pursuant to the Decree No. 118/2008/NĐ-CP dated November 27, 2008 of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

Pursuant to Decree No. 78/2002/NĐ-CP dated October 4, 2002 of the Government on credit for the poor and other policy beneficiaries;

Pursuant to Decision No. 180/2002/QĐ-TTg dated December 19, 2002 of the Prime Minister on issuing the financial management regulation for the Vietnam Social Policy Bank;

Pursuant to Decision No. 50/2010/QĐ-TTg dated July 28, 2010 of the Prime Minister on issuing the regulation on handling risky debts of the Vietnam Social Policy Bank;

The Ministry of Finance issues guidelines for implementing certain provisions of the Regulation on Handling Risky Debts at the Vietnam Social Policy Bank issued together with Decision No. 50/2010/QĐ-TTg dated July 28, 2010 of the Prime Minister (hereinafter referred to as the Regulation issued together with Decision No. 50/2010/QĐ-TTg) as follows:

Article 1. Scope of application

The subjects to which this Circular applies include:

Article 3. Creditors

2. Borrowers who borrow from the Vietnam Social Policy Bank in accordance with Decree No. 78/2002/NĐ-CP dated October 4, 2002 of the Government on credit for the poor and other policy beneficiaries and related legal documents, including:

a) Poor households.

b) Students and pupils facing difficult circumstances.

c) Borrowers of the National Employment Fund.

d) Policy beneficiaries going to work abroad for a limited period.

đ) Borrowers for implementing the national strategy on clean water supply and rural environmental sanitation.

e) Households engaged in production and business activities in difficult areas.

g) Households of ethnic minorities in particularly difficult conditions.

h) Beneficiaries of housing credit policies in certain regions according to Prime Minister's Decisions.

i) Merchants operating commerce in difficult areas.

k) Other subjects according to Prime Minister's Decisions.

3. Organizations and individuals involved in the process of providing credit to the poor and other policy beneficiaries at the Vietnam Social Policy Bank.

Article 2. Principles for Handling Risky Debts

1. The examination and handling of risky debts for borrowers shall be carried out when the following conditions are met:

a) The borrower belongs to the category eligible for borrowing under the regulations and has used the borrowed funds for the purpose specified in the loan agreement.

b) The borrower suffers losses due to objective reasons leading to partial or total loss of capital or assets.

c) The borrower faces financial difficulties that prevent them from being able to repay the debt to the bank.

2. The handling of risky debts for borrowers shall be considered on a case-by-case basis based on the causes of the risk, the degree of risk, and the borrower's ability to repay, ensuring complete legal documentation, compliance with procedures, objectivity, and fairness among borrowers.

3. The Chairman of the Board of Directors and the General Director of the Vietnam Social Policy Bank are responsible under the law and before state management agencies for the implementation of handling risky debts for borrowers at the Vietnam Social Policy Bank.

Article 3. Scope of Handling Risky Debts When Borrowers Have Collateral and Insurance

1. In cases where borrowers have collateral as stipulated and encounter risks due to objective reasons, the Vietnam Social Policy Bank may proactively handle the collateral in accordance with agreements with the borrower and legal provisions to recover the principal. The proceeds from the disposal of the collateral shall be used to cover the costs of disposing of the collateral; repay the principal and interest to the Vietnam Social Policy Bank; if there is a surplus, it will be returned to the borrower, and if there is a shortfall, the shortfall will be handled according to Article 6 of the Regulation issued together with Decision No. 50/2010/QĐ-TTg.

2. In cases where the collateral of borrowers (collateral, crops, livestock, poultry, and other assets) is insured and suffers damage, it shall be handled according to the insurance contract. The compensation amount from the insurance agency shall be used to repay the principal and interest to the Vietnam Social Policy Bank; if there is a surplus, it will be returned to the borrower, and if there is a shortfall, the shortfall will be handled according to Article 6 of the Regulation issued together with Decision No. 50/2010/QĐ-TTg.

Article 4. Specific provisions on objective causes.

1. The objective causes specified in Clause 1 of Article 5 of the regulation issued together with Decision No. 50/2010/QĐ-TTg include the following specific cases:

a) Natural disasters and impacts caused by climate change resulting in damage to capital and assets of customers including: typhoons, floods, droughts, earthquakes, landslides, severe cold, forest fires, pest infestations, fires.

b) Epidemics related to livestock, poultry, aquatic products, other animals raised, and crops.

2. The objective causes specified in Clause 2 of Article 5 of the regulation issued together with Decision No. 50/2010/QĐ-TTg include the following specific cases:

a) State policy adjustments directly affecting the production and business activities of customers such as no longer having sources of supply for raw materials; products subject to prohibition or restriction according to laws; or customers must implement production and business conversion according to decisions of competent state agencies.

b) Due to political, economic, and social fluctuations in regions, internationally, and in countries receiving Vietnamese laborers, directly impacting workers going abroad for temporary work such as: receiving enterprises being declared bankrupt or dissolved; receiving enterprises being affected by economic crises and unilaterally terminating labor contracts with workers.

3. The objective causes specified in Clause 3 of Article 5 of the regulation issued together with Decision No. 50/2010/QĐ-TTg include the following specific cases:

Customers borrowing capital, students, or people working abroad who borrow capital through households: losing capacity for civil acts; workers suffering occupational accidents during work abroad; frequently ill, suffering from mental illness, in particularly difficult circumstances without support; death; missing or declared dead or missing; and having no assets to repay debts, no heirs, or heirs unable to repay debts on behalf of the customer.

4. The objective causes specified in Clause 4 of Article 5 of the regulation issued together with Decision No. 50/2010/QĐ-TTg include the following specific cases:

Legal entities or economic organizations that have been decided to be dissolved or declared bankrupt according to the law and no longer have legal status, capital, or assets to repay debts to the Social Policy Bank.

Article 5. Determining the extent of damage to capital and assets

1. When customers borrowing capital encounter risks due to objective causes and submit a request to handle the risk, the Social Policy Bank will coordinate with relevant organizations and individuals to conduct audits and prepare a record confirming the extent of damage to the customer's capital and assets.

2. The record confirming the extent of damage to the customer's capital and assets shall be confirmed by the leadership of the Social Policy Bank where the loan was made, the Savings and Credit Group Leader; local political and social organization leaders entrusted with lending; the Chairman of the People's Committee of the commune or ward where the customer resides; confirmation from specialized agencies at the local level (if any) such as flood control agencies, fire prevention and firefighting agencies, preventive health agencies, veterinary agencies. The Social Policy Bank will issue a model record confirming the extent of damage to the customer's capital and assets for uniform application nationwide.

3. The determination of the extent (percentage) of damage to the customer's capital and assets for applying debt management measures is based on the actual amount of capital and assets lost by the customer due to objective causes (confirmed by auditing agencies) compared to the amount of capital used for the project or production and business plan recorded in the credit contract or loan application submitted by the customer. In the case of students borrowing capital to study at schools or policy beneficiaries borrowing capital to work abroad temporarily, the determination of the extent of damage is based on the actual amount of capital and assets lost compared to the total amount of capital borrowed from the Social Policy Bank.

Article 6. Legal documents for handling risky debts

1. For debt extension and write-off.

a) The customer's application for debt extension or write-off, specifying the reasons for damage; the extent of damage to capital and assets; repayment capacity; outstanding principal and interest owed to the Bank; the amount requested for write-off or extension.

b) A record confirming the extent of damage to capital and assets, established by the Social Policy Bank and the borrower, with confirmation from authorized individuals or organizations.

c) A copy of the Credit Contract and loan ledger showing the outstanding balance (principal and interest) up to the date of risk (signed and stamped by the Social Policy Bank branch that issued the loan).

d) In cases where the borrower is an economic organization, in addition to the above documents, the following papers are required:

- A record confirming the extent of loss and damage to capital and assets according to the law, accompanied by the economic organization's financial reports for the two most recent years.

- A plan to restore production and business operations of the economic organization.

2. For debt cancellation.

a) An application for debt cancellation detailing the reasons for the inability to repay the debt due to risk; the extent of damage to capital and assets; repayment capacity; outstanding principal and interest owed to the Bank; the amount of principal and interest requested for cancellation. If the borrower has died or gone missing without heirs, there is no need for an application for debt cancellation.

b) A record confirming the extent of damage to the customer's capital and assets. The record must include the content that all possible sources of payment have been exhausted; the customer has no remaining assets to repay the debt, no heir, or has an heir but the heir lacks the ability to repay on behalf of the customer.

c) Relevant documents of the customer, students, or overseas workers affected by specific risks as follows:

- In cases where the borrower's debt remains unpaid after the debt moratorium period (including additional moratoriums): On the record confirming the risky loan, a detailed assessment of the borrower's repayment capacity must be included, stating that the loan has exceeded the moratorium period (including additional moratoriums) and the borrower still cannot repay, and the Social Policy Bank has confirmed the exhaustion of all possible sources of payment as specified in Clause 2 of Article 5 of this Circular.

- In cases where the borrower, student, or overseas worker loses civil capacity: A certified copy of the court decision declaring the loss of civil capacity or a clear and specific confirmation from a health authority at the district level or higher.

- In cases where the borrower, student, or overseas worker suffers from chronic illness or mental illness: A certificate of health status (certified copy) from a health authority at the district level or higher.

- In cases where the borrower, student, or overseas worker faces particularly difficult circumstances with no place to rely on: A clear confirmation from the People's Committee of the commune on the record about the specific circumstances of the customer: the customer faces particularly difficult circumstances with no place to rely on.

- In cases where the borrower, student, or overseas worker dies or goes missing: A certified copy of the death certificate, or a certified copy of the court decision declaring disappearance.

- In cases where the borrower, student, or overseas worker is declared dead or missing: A clear confirmation from the People's Committee and the police station of the commune on the record regarding the following contents: full name, permanent residence registration, time and place of death or disappearance.

- In cases where overseas workers suffer work-related accidents during their employment: Documents regarding the degree of injury or medical records confirmed by the enterprise receiving labor abroad or foreign health authorities.

- Other relevant documents: In cases where there are no heirs, the following documents are required: Death certificate of the heir (if the heir has died), or a specific confirmation from the commune People's Committee on the record: the heir has died, or there are no heirs, or the heir is missing, or the heir lacks the ability to repay the debt.

d) In cases where the customer is a legal entity or economic organization that has been declared bankrupt or dissolved, a decision on bankruptcy or dissolution by the competent state agency or a declaration by the court (certified copy) and related documents concerning the liquidation of the bankrupt or dissolved entity as prescribed by law.

đ) A copy of the receipt for the debt, a copy of the credit contract, and the loan ledger showing the outstanding balance (principal and interest) up to the date of risk (signed and stamped by the Social Policy Bank branch that issued the loan).

e) Any related documents (if applicable).

Article 7. Sources of capital for handling risks

1. The source of capital to write off principal debts for customers shall be used from the credit risk reserve fund of the Social Policy Bank. In cases where the credit risk reserve fund of the Social Policy Bank is insufficient to cover the losses, the Chairman of the Board of Directors of the Social Policy Bank shall report to the Ministry of Finance to submit to the Prime Minister for consideration and decision.

2. The source of capital for extending debt terms and writing off debts for customers shall be included in the total annual operating capital of the Social Policy Bank.

- During the period of extended debt terms, the Social Policy Bank shall calculate and collect interest from customers according to the signed credit contracts and the prescribed regulations.

- During the period of debt write-off, the Social Policy Bank shall not calculate or collect interest from customers. When calculating and determining the annual interest rate subsidy amount, for the outstanding loan balance that has been written off, the Social Policy Bank shall apply an interest rate of 0% during the write-off period.

Article 8. Reporting System

1. Annually on June 30 and December 31, or upon urgent request, the Social Policy Bank shall prepare reports on the results of handling risky debts according to the attached forms and send them to the Ministry of Finance, the Ministry of Planning and Investment, the Ministry of Labor, Invalids and Social Affairs, and the State Bank of Vietnam.

2. The contents of the reports on the results of handling debts by the Social Policy Bank shall be prepared separately for each debt handling measure including extending debt terms, writing off debts, and writing off debts (principal and interest), detailing the list by province and centrally-administered city and by each credit program.

Article 9. Implementation Organization

1. This Circular shall take effect 45 days from the date of signature; it abolishes Circular No. 65/2005/TT-BTC dated August 16, 2005 of the Ministry of Finance guiding the Regulation on Handling Risky Debts at the Social Policy Bank issued pursuant to Decision No. 69/2005/QĐ-TTg dated April 4, 2005 of the Prime Minister.

2. During the implementation process, if there are any difficulties, agencies, organizations, and individuals are requested to promptly reflect them to the Ministry of Finance for consideration and resolution./.