Decision No. 1627/2001/QD-NHNN on the issuance of the Lending Regulations for credit institutions to customers

DECISION OF THE GOVERNOR OF THE STATE BANK OF VIETNAM

Regarding the issuance of the Lending Regulation for credit institutions towards customers

GOVERNOR OF THE STATE BANK OF VIETNAM

Pursuant to the Law on the State Bank of Vietnam and the Law on Credit Organizations dated December 12, 1997;

Pursuant to Decree No. 15/CP dated March 2, 1993 of the Government on the tasks, powers, and responsibilities for state management of ministries and ministerial-level agencies;

Pursuant to the proposal of the Director of the Monetary Policy Department,

DECISION:

Article 1. Issuing the Lending Regulation for credit institutions towards customers attached to this Decision.

Article 2. This Decision takes effect from February 1, 2002. The provisions in the Lending Regulation for credit institutions towards customers issued pursuant to Decision No. 284/2000/QĐ-NHNN1 dated August 25, 2000 of the Governor of the State Bank of Vietnam that conflict with this Regulation shall cease to be enforceable.

Article 3. Credit contracts signed before this Decision takes effect but not yet disbursed or partially disbursed and credit contracts with outstanding loans up to January 31, 2002, shall continue to be implemented according to the agreements already concluded until the principal and interest on the loan are fully repaid or the parties agree to amend or supplement the credit contract in accordance with the Lending Regulation for credit institutions towards customers issued pursuant to this Decision.

Article 4. Heads of units under the State Bank, Branch Directors of the State Bank in provinces and centrally-administered cities, Councils of Management and General Directors (Directors) of credit institutions, and borrowers of credit institutions are responsible for implementing this Decision./.

REGULATION ON LENDING BY CREDIT INSTITUTIONS

FOR CUSTOMERS

(Issued pursuant to Decision No. 1627/2001/QĐ-NHNN

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

Article 1. Scope of Regulation

This Regulation stipulates lending in Vietnamese Dong and foreign currency by credit institutions towards customers who are not credit institutions, aiming to meet capital needs for production, business, services, development investment, and living expenses.

Article 2. Applicability

1. Credit institutions established and conducting lending operations in accordance with the Law on Credit Institutions. In cases of lending in foreign currency, credit institutions must be authorized to conduct foreign exchange activities.

2. Borrowers at credit institutions:

a) Vietnamese legal entities and individuals including:

- Legal entities such as state-owned enterprises, cooperatives, limited liability companies, joint-stock companies, foreign-invested enterprises, and other organizations meeting the conditions prescribed in Article 94 of the Civil Code;

- Individuals;

- Households;

- Cooperatives;

- Private enterprises;

- Joint ventures.

b) Foreign legal entities and individuals.

Article 3. Explanation of Terms

In these Regulations, the following terms shall be understood as follows:

1. Lending is a form of credit provision whereby a credit institution grants a customer the use of a sum of money for a specific purpose and period as agreed upon, with the principle of repayment of both principal and interest.

2. The term of lending is the period calculated from when the customer begins to receive the loan funds until the time when all principal and interest on the loan have been fully repaid as agreed in the credit contract between the credit institution and the customer.

3. Repayment periods are the intervals within the term of lending agreed upon between the credit institution and the customer during which the customer must repay part or all of the loan to the credit institution at the end of each interval.

4. Adjusting repayment periods is the agreement between the credit institution and the customer regarding changes to previously agreed repayment periods in the credit contract.

5. Extending the loan term is the credit institution's approval to extend the loan term beyond the originally agreed period in the credit contract.

6. An investment project, production and business plan, service plan, or living support plan is a set of proposals regarding capital requirements, methods of using capital, and corresponding results expected to be achieved within a specified period for a specific activity aimed at production, business, services, development investment, or living support.

7. Credit limit is the maximum outstanding loan balance maintained over a certain period as agreed in the credit contract between the credit institution and the customer.

8. The financial capacity of the borrowing customer is the ability of the borrowing customer in terms of capital and assets to ensure ongoing operations and fulfill payment obligations.

Article 4. Implementation of foreign exchange management regulations

When lending in foreign currency, credit organizations and customers must comply with the provisions of the Government and the guidance of the State Bank of Vietnam on foreign exchange management.

Article 5. Autonomy of credit organizations

Credit organizations bear responsibility for their own lending decisions. No organization or individual may interfere illegally in the autonomy of credit organizations during the lending and debt recovery process.

Article 6. Principles of borrowing

Borrowers from credit organizations must ensure the following:

1. Using borrowed funds for the agreed purpose in the credit contract.

2. Repaying the principal and interest of the loan according to the agreed term in the credit contract.

Article 7. Conditions for borrowing

Credit organizations shall consider and decide to lend when borrowers meet the following conditions:

1. Having civil legal capacity, civil conduct capacity, and civil liability as prescribed by law:

a) For Vietnamese corporate and individual borrowers:

- Corporate entities must have civil legal capacity;

- Individuals and private business owners must have civil legal capacity and civil conduct capacity;

- Representatives of family households must have civil legal capacity and civil conduct capacity;

- Representatives of cooperative organizations must have civil legal capacity and civil conduct capacity;

- General partners of limited partnerships must have civil legal capacity and civil conduct capacity;

b) For foreign corporate and individual borrowers, they must have civil legal capacity and civil conduct capacity as prescribed by the laws of the country where the corporate entity has citizenship or the individual is a citizen, if such foreign law is provided for in the Civil Code of the Socialist Republic of Vietnam, other Vietnamese legal documents, or international treaties to which the Socialist Republic of Vietnam is a party.

2. Legal purpose for using borrowed funds.

3. Financial capability to repay the debt within the committed period.

4. Having feasible and effective investment projects, production plans, business operations, services, or living service projects that comply with legal provisions.

5. Implementing the provisions on securing borrowed funds as prescribed by the Government and the guidance of the State Bank of Vietnam.

Article 8. Types of loans

Credit organizations shall consider and decide to lend to customers in short-term, medium-term, and long-term types to meet capital needs for production, business, services, living, and development projects:

1. Short-term loans are loans with a term of up to 12 months;

2. Medium-term loans are loans with a term of more than 12 months to 60 months;

3. Long-term loans are loans with a term of over 60 months.

Article 9. Capital needs not to be lent

1. Credit organizations shall not lend for the following capital needs:

a) To purchase assets and expenses forming assets that are prohibited by law from being bought, transferred, or converted;

b) To pay expenses for transactions prohibited by law;

c) To meet the main requirements of transactions prohibited by law.

2. Debt rollover shall be carried out by credit organizations in accordance with specific regulations of the State Bank of Vietnam.

Article 10. Loan Term

Credit organizations and customers shall base their agreement on the production cycle, business period, capital recovery term of the investment project, the customer's debt repayment capacity, and the credit organization's loanable funds to determine the loan term. For domestic and foreign legal entities, the loan term shall not exceed the remaining operational period as decided upon establishment or licensed operation in Vietnam; for foreign individuals, the loan term shall not exceed the permitted residence and activity period in Vietnam.

Article 11. Interest Rate on Loans

1. The loan interest rate shall be agreed upon by credit organizations and customers in accordance with the regulations of the State Bank of Vietnam.

2. The interest rate applied to overdue principal debts shall be determined by the credit organization and agreed upon with the customer in the credit contract but shall not exceed 150% of the loan interest rate applicable during the loan term already signed or adjusted in the credit contract.

Article 12. Loan Amount

1. Credit organizations shall base their decision on the borrowing needs and debt repayment capacity of customers, as well as their own capital sources, to determine the loan amount.

2. The total outstanding loan limit for a single customer shall be implemented according to the provisions of Article 18 of this Regulation.

3. The total outstanding loan amount for the objects specified in Article 20 of this Regulation shall not exceed 5% of the credit organization's own capital.

Article 13. Repayment of Principal and Interest on Loans

1. Credit organizations and customers shall agree on the repayment of principal and interest on loans as follows:

a) Repayment periods for principal;

b) Interest repayment periods on loans together with the principal repayment periods or separately;

c) Currency for repayment and methods to maintain the value of the principal, in compliance with legal provisions.

2. Upon reaching the principal or interest repayment due date, if the customer fails to repay on time without an extension of the principal or interest repayment period or without an extension of the principal or interest debt, the credit organization shall transfer the entire outstanding balance to overdue debt.

3. Credit organizations and customers may agree on conditions, interest rates on loans, and fees payable in case of early repayment.

4. Repayment of loans in foreign currency: Any loan made in a foreign currency must be repaid in that same foreign currency; in cases where repayment is made in another foreign currency or in Vietnamese Dong, it shall be carried out according to the agreement between the credit organization and the customer in compliance with government foreign exchange management regulations and guidelines from the State Bank of Vietnam.

Article 14. Loan Application Documents

1. When there is a need for a loan, the customer shall submit a loan application letter and necessary documents proving eligibility for the loan as stipulated in Article 7 of this Regulation to the credit organization. The customer shall bear legal responsibility for the accuracy and legality of the documents submitted to the credit organization.

2. Credit organizations shall guide the types of documents that customers need to submit based on the specific characteristics of each type of customer, loan type, and loan amount.

Article 15. Examination and Decision on Loan Approval

1. Credit organizations shall establish a loan approval process based on the principle of ensuring independence and clearly defining individual responsibilities, as well as responsibilities between the examination and loan approval stages.

2. Credit organizations shall review and assess the feasibility and effectiveness of investment projects, production, business, service plans, or investment projects, service plans serving daily life, and the customer's ability to repay the loan to make a loan approval decision.

3. Credit organizations shall specify and publicly announce the maximum period within which they must notify the customer of the loan approval or rejection decision, from the date of receipt of complete loan application documents and necessary customer information. In cases of loan rejection, the credit organization must notify the customer in writing, specifying the grounds for rejecting the loan.

Article 16. Methods of Loan Provision

Credit organizations shall agree with borrowing customers on the application of loan methods;

1. Single loan; Each time borrowing capital, the customer and credit organization shall carry out necessary borrowing procedures and sign a credit contract.

2. Loan based on credit limit: The credit organization and the customer shall determine and agree on a credit limit to be maintained for a certain period of time.

3. Loan for investment projects: The credit organization shall provide borrowing capital to the customer to implement investment projects for production development, business operation, services, and investment projects serving daily life.

4. Syndicated loan: A group of credit organizations jointly provide loans for a borrowing project or a borrowing plan of the customer; among which, one credit organization acts as the lead coordinator and collaborates with other credit organizations. The syndicated loan shall be implemented according to the provisions of this Regulation and the co-financing regulations of credit organizations issued by the Governor of the State Bank of Vietnam.

5. Installment loan; When borrowing capital, the credit organization and the customer shall determine and agree on the amount of interest and principal to be paid in installments over multiple periods within the loan term.

6. Standby credit limit loan: The credit organization commits to ensuring readiness to provide borrowing capital to the customer within a specified credit limit. The credit organization and the customer shall agree on the validity period of the standby credit limit and the fee for the standby credit limit.

7. Loan through issuance and use of credit card: The credit organization shall approve the customer's use of borrowed capital within the credit limit to pay for goods and services and withdraw cash from automatic teller machines or cash advance points that are agents of the credit organization. When issuing and using credit cards, the credit organization and the customer must comply with the Government and State Bank of Vietnam's regulations on credit card issuance and use.

8. Overdraft limit loan: It is a loan where the credit organization agrees in writing to allow the customer to exceed the amount available in their payment account in accordance with the Government and State Bank of Vietnam's regulations on payment activities through service providers.

9. Other loan methods not prohibited by law, consistent with the provisions of this Regulation and the operating conditions of the credit organization and the characteristics of the borrowing customer.

Article 17. Credit Contract

The provision of loans by credit organizations and borrowing customers must be established in a credit contract. The credit contract must include contents on borrowing conditions, purpose of using borrowed capital, loan method, amount of borrowed capital, interest rate, loan term, guarantee form, value of guaranteed assets, repayment method, and other commitments agreed upon by both parties.

Article 18. Loan Limitations

1. The total outstanding debt for a single customer shall not exceed 15% of the credit organization's own capital, except for loans from entrusted funds of the Government, organizations, and individuals. In cases where a customer's capital requirement exceeds 15% of the credit organization's own capital or the customer requires capital from multiple sources, credit organizations shall provide syndicated loans in accordance with the regulations of the State Bank of Vietnam.

2. In special cases, credit organizations may only provide loans exceeding the loan limitations set forth in Clause 1 of this Article when approved by the Prime Minister for each specific case.

3. The determination of the own capital of credit organizations as the basis for calculating the loan limitations stipulated in Clauses 1 and 2 of this Article shall be carried out in accordance with the regulations of the State Bank of Vietnam.

Article 19. Situations where lending is not permitted

1. Credit institutions shall not lend to customers in the following cases:

a) Members of the Board of Directors, Supervisory Board, General Director (Director), Deputy General Director (Deputy Director) of the credit institution;

b) Staff of the credit institution who perform tasks of assessing and deciding on lending;

c) Father, mother, wife, husband, son, daughter of members of the Board of Directors, Supervisory Board, General Director (Director), Deputy General Director (Deputy Director).

2. The provisions of Clause 1 of this Article shall not apply to cooperative credit institutions.

3. The application of the provision at point c Clause 1 of this Article to borrowers who are father, mother, wife, husband, son, or daughter of the Branch Director of the credit institution shall be decided by the credit institution upon examination.

Article 20. Restrictions on Lending

Credit institutions shall not lend without collateral, or lend with preferential interest rates or loan amounts to the following entities:

1. Auditing organizations, Responsible Auditors conducting audits at the lending credit institution; Inspectors performing inspection tasks at the lending credit institution; Chief Accountants of the lending credit institution;

2. Large shareholders of the credit institution;

3. Enterprises that have one of the subjects specified in Clause 1 of Article 77 of the Law on Credit Institutions owning more than 10% of the charter capital of such enterprises.

Article 21. Monitoring of Loan Capital

Credit institutions shall establish procedures and implement monitoring of the borrowing process, use of borrowed capital, and repayment by customers in accordance with the characteristics of the credit institution's operations and the nature of the loan, to ensure effectiveness and the ability to recover the borrowed capital.

Article 22. Adjustment of Repayment Terms for Principal and Interest, Extension of Repayment for Principal and Interest

1. Adjustment of repayment terms for principal, extension of repayment for principal:

a) In the case where the customer cannot repay the principal according to the agreed term in the credit contract and submits a written request, the credit institution shall consider adjusting the repayment term.

b) In the case where the customer fails to repay the full principal within the loan period and submits a written request for extension of the debt, the credit institution shall consider extending the debt. The maximum extension period for short-term loans is 12 months, and for medium-term and long-term loans, it is half of the agreed loan period in the credit contract. If the customer requests an extension beyond these periods due to objective reasons and to facilitate the customer's ability to repay, the Chairman of the Board of Directors or the General Director (Director) of the credit institution shall consider and decide immediately and report to the State Bank of Vietnam after implementation.

2. Adjustment of repayment terms for interest, extension of repayment for interest:

a) In the case where the customer fails to repay the interest according to the agreed term in the credit contract and submits a written request for adjustment of the repayment term for interest, the credit institution shall consider and decide on the adjustment of the repayment term for interest.

b) In the case where the customer fails to fully repay the interest within the agreed loan period in the credit contract and submits a written request for extension of the interest debt, the credit institution shall consider and decide on the extension period for the interest debt. The extension period for the interest debt shall be applied according to the extension period for the principal debt as stipulated in point b Clause 1 of this Article.

Article 23. Exemption and Reduction of Interest

Credit organizations are authorized to decide on the exemption and reduction of interest payable on loans to customers based on the following principles:

1. Customers suffering financial losses related to the loan leading to financial difficulties;

2. The level of exemption and reduction of interest on loans must be commensurate with the credit organization's financial capacity;

3. Credit organizations shall not exempt or reduce interest on loans for customers falling under the categories specified in Clause 1, Article 78 of the Law on Credit Organizations;

4. Credit organizations must issue Regulations on Exemption and Reduction of Loan Interest for customers approved by the Board of Directors. The exemption and reduction of interest on loans for customers can only be implemented when the credit organization has such Regulations.

Article 24. Rights and Obligations of Borrowers

1. Borrowers have the right:

a) To refuse requests from credit organizations that are not in accordance with the agreements in the credit contract;

b) To lodge complaints or initiate legal proceedings against breaches of the credit contract in accordance with the provisions of the law;

2. Borrowers have the obligation:

a) To provide complete and truthful information and documents related to borrowing and bear responsibility for the accuracy of the provided information and documents;

b) To use borrowed funds for the intended purpose and fulfill all contents agreed upon in the credit contract and other commitments;

c) To repay principal and interest on the loan according to the agreement in the credit contract;

d) To bear legal responsibility when failing to fulfill the agreements regarding repayment of the loan and the performance of collateral obligations committed in the credit contract.

Article 25. Rights and Obligations of Credit Organizations

1. Credit organizations have the right:

a) To request customers to provide documentation proving investment projects, production, business, service plans, or feasible living support projects, their own and guarantor’s financial capacity before deciding to lend;

b) To refuse loan requests if the customer does not meet the borrowing conditions, the loan project or plan is ineffective, inconsistent with legal regulations, or the credit organization lacks sufficient funds to lend;

c) To monitor the borrowing process, use of borrowed funds, and repayment by customers;

d) To terminate lending, recover debt ahead of schedule when discovering that customers have provided false information or violated the credit contract;

đ) To initiate legal proceedings against customers who violate the credit contract or guarantors in accordance with the law;

e) When the due date for repayment arrives and the customer fails to repay, unless otherwise agreed by the parties, the credit organization has the right to dispose of the collateral assets in accordance with the agreement in the contract to recover the debt in accordance with the law or request the guarantor to fulfill the guarantee obligation for the case where the customer is guaranteed borrowing;

g) To exempt, reduce loan interest, extend debt, adjust the term of debt repayment in accordance with the provisions of this Regulation; buy and sell debts in accordance with the State Bank of Vietnam's regulations and implement debt restructuring, debt write-off, and debt cancellation in accordance with government regulations and guidance from the State Bank of Vietnam;

2. Credit organizations have the obligation:

a) To fulfill the agreements in the credit contract;

b) To retain credit files in compliance with legal regulations.

Article 26. Preferential loans and project investment loans under state development credit.

1. Credit organizations shall provide loans to customers who are eligible for preferential credit policies as prescribed by the Government and guided by the State Bank of Vietnam during each period.

2. Credit organizations shall provide loans for investment projects under state development credit according to the laws on state development credit.

3. State-owned credit organizations designated by the Government to provide loans to eligible customers and for investment projects under state development credit shall handle any interest rate differences and losses from such loans due to objective reasons in accordance with the Government's regulations and guidance from the State Bank of Vietnam and relevant ministries and sectors.

4. Before providing preferential loans and loans for investment projects under state development credit, credit organizations must assess the effectiveness of the project or loan plan. If it is found that there is no effectiveness and no ability to repay both principal and interest, they must report to the competent state agency for consideration and decision.

Article 27. Loans pursuant to Entrustment

1. Credit organizations shall provide loans pursuant to entrustment from the Government, domestic and foreign organizations, and individuals in accordance with loan entrustment contracts signed with government representative agencies or domestic and foreign organizations and individuals. Entrusted loans must comply with current banking credit laws and entrustment contracts.

2. Credit organizations providing entrusted loans shall enjoy entrustment fees and other benefits agreed upon in the loan entrustment contract in compliance with the law and international practices, ensuring sufficient coverage of costs, risks, and profit.

Article 28. Implementation Organization

1. Credit organizations and borrowing customers are responsible for implementing this Regulation. Based on this Regulation and related legal documents, credit organizations shall issue specific operational guidelines consistent with their conditions, characteristics, and bylaws.

2. Amendments and supplements to this Regulation shall be decided by the Governor of the State Bank of Vietnam./.