Circular No. 18/2010/TT-NHNN detailing the implementation of interest rate support for organizations and individuals borrowing medium and long-term loans at the Vietnam Development Bank

CIRCULAR

Detailed regulations on interest rate support for organizations and individuals borrowing medium and long-term loans from the Vietnam Development Bank

individual borrowing funds for medium and long-term from Vietnam Development Bank

Pursuant to Resolution No. 30/2008/NQ-CP dated December 11, 2008 of the Government on urgent measures to prevent economic decline, maintain economic growth, and ensure social security;

Pursuant to Decision No. 443/QĐ-TTg dated April 4, 2009 of the Prime Minister on interest rate support for organizations and individuals borrowing medium and long-term bank loans to implement new investment projects for production and business development; the guidance of the Prime Minister in Document No. 670/TTg-KTTH dated May 5, 2009 regarding the implementation of Decisions No. 131/QĐ-TTg dated January 23, 2009 and Decision No. 443/QĐ-TTg dated April 4, 2009;

The State Bank of Vietnam hereby provides detailed regulations on interest rate support for organizations and individuals borrowing medium and long-term loans from the Vietnam Development Bank as follows:

Article 1. Purpose of interest rate support

The State supports interest rates for medium and long-term loans in Vietnamese dong borrowed by organizations and individuals from the Vietnam Development Bank to implement investment projects for production and business development, infrastructure construction, and capital needs to fulfill export contracts, thereby reducing investment costs, enhancing production and business capacity, product competitiveness, and job creation.

Article 2. Objectives and scope of application of interest rate support regulations

1. The Vietnam Development Bank provides preferential loans and other types of loans to eligible borrowers as stipulated in Decree No. 106/2008/NĐ-CP dated September 19, 2008 of the Government amending and supplementing certain provisions of Decree No. 151/2006/NĐ-CP dated December 20, 2006 on state investment credit and export credit, and related documents.

2. Borrowers eligible for interest rate support are project investors and exporters borrowing from the Vietnam Development Bank in accordance with government, Prime Minister, and Ministry of Finance regulations.

3. Types of loans eligible for interest rate support include medium and long-term loans in Vietnamese dong under credit agreements signed before and after April 1, 2009, which are disbursed (one or multiple times) between April 1 and December 31, 2009 at the Vietnam Development Bank, as stipulated by the Government and the Prime Minister, including:

a) Loans according to previous government regulations on state investment credit prior to the effective date of Decree No. 106/2008/NĐ-CP.

b) Loans according to the list of state investment credit loans specified in Decree No. 106/2008/NĐ-CP.

c) Loans according to government and Prime Minister regulations: overseas investment projects; Hanoi-Haiphong expressway project; compensation and resettlement costs for the Son La hydropower project; entrusted revolving fund loan projects; export credit with loan terms exceeding 12 months; other projects;

d) Loans disbursed to serve approved borrowing projects by competent authorities and the Vietnam Development Bank, including: payment and advance payment of project costs; repayment of self-funded capital that the borrower has advanced for project payments; transferring funds into the borrower's deposit account to pay project costs.

Article 3. Principles, time limit, interest rate level, and method of interest rate support

1. The principle of interest rate support is that the Vietnam Development Bank shall provide loans for medium and long-term capital needs in Vietnamese dong according to the current lending mechanism and implement interest rate support in accordance with the regulations of the Prime Minister and the guidance of the Ministry of Finance and the State Bank of Vietnam.

2. The maximum loan period eligible for interest rate support is twenty-four months, starting from the date of disbursement for loans under credit contracts signed before and after April 1, 2009, which were disbursed between April 1, 2009, and December 31, 2009. Interest rate support shall be implemented from April 1, 2009, to December 31, 2011. Loans within the scope of interest rate support that are overdue, extended, or have an actual loan term exceeding twenty-four months will not be eligible for interest rate support during the periods of overdue repayment, extension, and exceeding twenty-four months.

3. The level of interest rate support for borrowers:

a) The level of interest rate support for borrowers is four percent per annum, calculated on the amount borrowed and the actual loan term within the period from April 1, 2009, to December 31, 2011.

b) In cases where borrowers have the need to borrow medium and long-term capital in Vietnamese dong at the Vietnam Development Bank, secured or guaranteed by negotiable instruments, savings books, and other monetary forms (collectively referred to as negotiable instruments), or where borrowers have deposits at the Vietnam Development Bank and other credit institutions, and such loans fall within the scope of interest rate support, the following interest rate support measures shall be implemented:

- For negotiable instruments purchased or already existing (generated) before February 1, 2009, the Vietnam Development Bank shall provide interest rate support for the entire outstanding loan balance; for negotiable instruments purchased or already existing (generated) from February 1, 2009, the Vietnam Development Bank shall provide interest rate support for the portion of the outstanding loan balance equal to the difference between the outstanding loan balance and the value of the negotiable instruments pledged or guaranteed by the borrower.

- For borrowers who have deposits at the Vietnam Development Bank and other credit institutions generated from February 1, 2009: The Vietnam Development Bank shall provide interest rate support for the portion of the outstanding loan balance equal to the difference between the outstanding loan balance and the value of the deposit account of the borrower at the time of signing the credit contract. The value of the deposit account of the borrower at the Vietnam Development Bank and other credit institutions includes the balance of fixed-term and non-fixed-term deposit accounts in Vietnamese dong and foreign currency; it does not include the balance of deposit accounts for entrusted investment funds, self-owned investment funds participating in project investments, deposit accounts held pending settlement and warranty of construction projects, deposit accounts for guarantees, and frozen deposit accounts as stipulated by law. Borrowers are responsible for reporting to the Vietnam Development Bank the value of deposit accounts in Vietnamese dong and foreign currency at other credit institutions and bear responsibility for the legality and accuracy of this report.

4. The method of implementing interest rate support is that when collecting loan interest, the Vietnam Development Bank shall reduce the amount of interest payable to the borrower by the amount of interest on the loan that has been supported. The State Bank of Vietnam shall transfer the interest on the loan that has been supported in accordance with Clause 1 of Article 5 of this Circular.

Article 4. Procedures and responsibilities of borrowing customers and the Vietnam Development Bank in implementing interest rate support

1. For borrowing customers with loans falling within the scope of interest rate support:

a) From April 1 to December 31, 2009, when initially borrowing from the Vietnam Development Bank at the lending branch, the borrowing customer shall submit an application for interest rate support to the Vietnam Development Bank according to Form 01 attached to this Circular.

b) Utilize borrowed funds for purposes specified in the loan agreement that fall within the scope of interest rate support. If borrowed funds are not utilized for the intended purpose, then interest rate support will not be provided, and the borrowing customer must repay to the Vietnam Development Bank the previously supported interest and be subject to legal sanctions.

c) Provide complete and truthful information and documents to prove the purpose of the borrowed funds eligible for interest rate support and bear legal responsibility for the accuracy of the information and documents provided to the Vietnam Development Bank.

d) Comply with the Vietnam Development Bank's regulations on loan procedures, interest rate support, and reporting requirements.

đ) Account for the payment of interest on borrowed funds according to the amount of interest due to the Vietnam Development Bank after receiving interest rate support as prescribed by law.

e) Request the Vietnam Development Bank at the lending branch to implement interest rate support in accordance with the provisions of law.

2. For the Vietnam Development Bank:

a) Implement interest rate support for borrowing customers in accordance with the Prime Minister's regulations and the State Bank of Vietnam's guidelines; shall not refuse interest rate support if the loan falls within the scope of support; report periodically to the State Bank of Vietnam and the Ministry of Finance for inspection and supervision of interest rate support; provide bank account information to the State Bank of Vietnam (Trading Department and Monetary Policy Department) for transferring interest rate support funds.

b) Record the contents related to interest rate support in the loan agreement based on the purpose of using borrowed funds within the scope of interest rate support as prescribed by law; reject requests for interest rate support that do not comply with legal regulations.

c) The Chairman of the Management Council and the General Director of the Vietnam Development Bank shall be responsible and subject to legal sanctions for cases of non-compliance with interest rate support regulations.

d) Provide the State Bank of Vietnam (Bank Inspection and Supervision Authority and State Bank Branches in provinces and centrally-administered cities) with regulations on lending operations, government and Prime Minister decisions on investment project and export credit lists.

đ) Conduct pre-loan, during-loan, and post-loan inspections to ensure compliance with interest rate support regulations. If it is found that the borrowing customer has misused borrowed funds for purposes within the scope of interest rate support, recover the previously supported interest; if recovery is not possible, report to the competent state authority for handling or initiate legal action against the borrowing customer's breach of the loan agreement.

e) Guide borrowing customers to ensure convenient, safe, and compliant borrowing.

g) When collecting interest from borrowing customers, the Vietnam Development Bank shall deduct the amount of interest due from the customer equal to the amount of interest supported under the law. If the interest collection period has not arrived by December 31, 2011, the Vietnam Development Bank shall calculate the interest due from the customer and deduct the amount of interest supported under the law. Interest calculation and collection shall be carried out in accordance with the law; record and track the interest on borrowed funds eligible for interest rate support as follows:

- Record all interest income in accordance with current financial regulations; interest supported by the State Bank of Vietnam shall be recorded in a separate account for interest rate support from 2009 to 2011.

- Maintain detailed records (or databases) of each loan supported by interest rate support (borrowing customer, loan amount, term and interest rate, amount of interest support...) to be sent to the borrowing customer for tracking, statistics, internal audit, and reporting to the State Bank of Vietnam and state authority inspections and supervision.

h) Issue a certificate of interest rate support signed and stamped by both the borrowing customer and the Vietnam Development Bank at the lending branch (signed and stamped) as evidence for inspection and supervision. The certificate of interest rate support shall be issued in three copies, one copy retained as accounting documentation, one copy retained in the loan file, and one copy sent to the borrowing customer. The certificate of interest rate support shall be issued each time interest is collected and the supported interest deducted, or issued monthly in accordance with the reporting deadline for interest rate support to the State Bank of Vietnam and the Ministry of Finance.

i) Submit registration forms for interest rate support plans and reports on the amount of interest rate support to the State Bank of Vietnam according to the forms attached to this Circular:

 - Quarterly registration form for interest rate support plan according to Form 02 attached to this Circular, to be submitted no later than the 10th day of the first month of the quarter.

- Monthly report on the implementation of interest rate support according to Forms 03 and 04 attached to this Circular, to be submitted no later than the 10th day of the month following the reported month.

k) Timely and accurately monitor and statistically track loans supported by interest rate support to serve internal auditing, reporting to the State Bank of Vietnam, and state authority inspections and supervision; open accounts or apply appropriate systems to separately record and statistically track loans supported by interest rate support.

l) Recover and transfer to the State Bank of Vietnam the amount of interest rate support for loans that do not comply with legal regulations.

m) Inspect the activities related to interest rate support loans of Branches and Trading Departments; report quarterly (on the 20th day of the last month of each quarter) to the State Bank of Vietnam (Department of Monetary Policy and Banking Supervision Agency) and the Ministry of Finance on the implementation of interest rate support regulations throughout the system.

n) Manage and retain records of interest rate support loans according to the provisions of the law.

Article 5. Transfer of Interest Rate Support Funds and Inspection and Supervision of Interest Rate Support Loans

1. The State Bank of Vietnam shall transfer 90% of the interest rate support funds to the Vietnam Development Bank based on reports from the Vietnam Development Bank regarding completed interest rate support loans; the Chairman of the Management Council and the General Director of the Vietnam Development Bank shall be responsible under the law for implementing interest rate support and the accuracy of the reports. The remaining interest rate support funds shall be transferred based on the settlement of the interest rate support funds for the Vietnam Development Bank.

2. The State Bank of Vietnam shall cooperate with the Ministry of Finance to conduct regular or spot inspections and audits of the Vietnam Development Bank's interest rate support loan activities.

Article 6. Responsibilities of Units under the State Bank of Vietnam

1. Department of Monetary Policy: Coordinate with units under the State Bank of Vietnam to handle issues related to the interest rate support mechanism; receive registration plans for interest rate support and reports on the situation of interest rate support from the Vietnam Development Bank; notify the transfer of interest rate support funds to the Vietnam Development Bank; guide the settlement of interest rate support funds; prepare reports to submit to the Prime Minister.

2. Department of Finance and Accounting: Handle accounting issues related to the interest rate support mechanism.

3. Trading Department: Implement accounting entries and transfer interest rate support funds to the Vietnam Development Bank according to the Governor's Decision of the State Bank of Vietnam and the notification of the Department of Monetary Policy.

4. Banking Supervision Agency: Lead and coordinate with relevant units of the Ministry of Finance to inspect and handle violations of the Vietnam Development Bank concerning the interest rate support regulations.

5. State Bank of Vietnam branches in provinces and centrally-administered cities: Conduct inspections, audits, and handle situations within their authority regarding the implementation of interest rate support regulations by Vietnam Development Bank Branches; report and propose solutions to the Governor of the State Bank of Vietnam for arising issues.

Article 7. Implementation Organization

1. This Circular takes effect from the date of signature. Regulations on interest rate support for the Vietnam Development Bank stipulated in Circular No. 24/2009/TT-NHNN dated December 14, 2009, detailing the implementation of interest rate support for organizations and individuals borrowing medium and long-term loans from the Vietnam Development Bank and local development investment funds for new production and business investments cease to be effective. For loans generated from April 1, 2009, which fall under the interest rate support criteria specified in this Circular but have not yet been subject to the interest rate support mechanism, the Vietnam Development Bank shall implement interest rate support according to the law and this Circular from the date the loan is generated.

2. The Head of the Office, Heads of the Department of Monetary Policy, Heads of units under the State Bank of Vietnam, Governors of State Bank of Vietnam branches in provinces and centrally-administered cities, Chairman of the Management Council and General Director of the Vietnam Development Bank, and borrowers are responsible for implementing this Circular./.