Circular No. 19/2024/TT-NHNN amends and supplements certain provisions of Circular No. 08/2023/TT-NHNN dated June 30, 2023, issued by the Governor of the State Bank of Vietnam on conditions for foreign loans not guaranteed by the Government.

CIRCULAR

Amending and supplementing certain provisions of Circular No. 08/2023/TT-NHNN dated June 30, 2023 of the Governor of the State Bank of Vietnamregarding conditions for foreign borrowing not guaranteed by the Governmentngoài không được Chính phủ bảo lãnh

Pursuant to the Law on the State Bank of Vietnam dated June 16, 2010;

Pursuant to the Law on Credit Institutions dated January 18, 2024;

Pursuant to the Foreign Exchange Law dated December 13, 2005; and the Ordinance amending and supplementing certain provisions of the Foreign Exchange Law dated March 18, 2013;

Pursuant to Decree No. 219/2013/NĐ-CP dated December 25, 2013 of the Government on management of foreign borrowing and repayment by enterprises not guaranteed by the Government;

Pursuant to Decree No. 102/2022/NĐ-CP dated December 12, 2022 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 Department of Foreign Exchange Management;

The Governor of the State Bank of Vietnam hereby issues this Circular amending and supplementing certain provisions of Circular No. 08/2023/TT-NHNN dated June 30, 2023 of the Governor of the State Bank of Vietnam regarding conditions for foreign borrowing not guaranteed by the Government.

Article 1. Amending and supplementing certain provisions of Circular No. 08/2023/TT-NHNN

1. Supplement Clause 9 to Article 3 as follows:

"9. A foreign loan arising from the issuance of a Letter of Credit by a credit institution or a foreign bank branch (issuing bank) is a loan formed from the issuance of a deferred payment Letter of Credit with an immediate or pre-maturity payment clause according to current laws governing Letter of Credit operations and other related business activities. In this case, the issuing bank (borrower) receives credit from the reimbursing bank (lender), which is a non-resident, when the reimbursing bank pays the beneficiary before the maturity date of the Letter of Credit as stipulated in the Letter of Credit agreement."

2. Supplement Article 5a as follows:

"Article 5a. Foreign loans for payment under import contracts of borrowers that are not credit institutions or foreign bank branches

1. When implementing foreign loans for payment under deferred payment import contracts serving investment projects or production and business plans, or other projects of the borrower:

a) The purpose of the foreign loan of the borrower is determined to serve the implementation of investment projects or production and business plans, or other projects of the borrower as prescribed in Article 17 of this Circular;

b) The borrower may exclude foreign medium- and long-term debt arising from deferred payment import contracts when calculating the foreign borrowing limit prescribed in point a, Clause 1 and Clause 2, Article 18 of this Circular.

2. The borrower may borrow foreign funds to pay for import contracts (including mandatory repayments to the issuing bank) under Letters of Credit issued by the issuing bank."

3. Amending and supplementing Clause 3 of Article 9 as follows:

"3. The foreign loan agreement must be concluded in writing either before or on the day of drawing down the foreign loan. The conclusion of the foreign loan agreement on the day of drawing down the foreign loan can only be carried out in the following cases:

a) Short-term foreign loans with the condition that the disbursement of the loan takes place after the parties conclude the loan agreement;

b) Foreign loans arising from the conversion of project preparation funds already approved by Investment Registration Certificates into foreign loans according to regulations on foreign exchange management for foreign borrowing and repayment and direct foreign investment in Vietnam;

c) Short-term foreign loans arising from Letter of Credit operations of credit institutions or foreign bank branches."

4. Amending and supplementing Article 14 as follows:

"Article 14. Purpose of foreign borrowing

1. Borrowers may borrow short-term and medium- and long-term foreign funds for the following purposes:

a) To supplement capital for credit activities according to the credit growth of the borrower;

b) To restructure the borrower's foreign debt;

c) To pay the beneficiary through the reimbursing bank in deferred payment Letter of Credit operations with an immediate or pre-maturity payment clause according to current laws governing Letter of Credit operations and other related business activities.

2. Except for the case specified in point c, Clause 1 of this Article, when borrowing medium- and long-term foreign funds, the borrower must prove the purpose of the foreign borrowing through:

a) The plan for using foreign borrowed funds as prescribed in Clause 2, Article 7 of this Circular in the case of borrowing for the purpose specified in point a, Clause 1 of this Article;

b) The debt restructuring plan as prescribed in Article 8 of this Circular in the case of borrowing for the purpose specified in point b, Clause 1 of this Article."

5. Amending and supplementing Article 15 as follows:

"Article 15. Limit on short-term foreign borrowing

1. Borrowers may only borrow short-term foreign funds if they meet the short-term foreign borrowing limit at the end of December of the year immediately preceding the occurrence of the loan. The short-term foreign borrowing limit is the maximum ratio of total principal of short-term foreign loans to standalone equity, applicable to specific entities as follows:

a) 30% for commercial banks;

b) 150% for foreign bank branches and other credit institutions.

2. The provision of Clause 1 of this Article does not apply in the case of foreign loans arising from the issuance of Letters of Credit by credit institutions or foreign bank branches."

6. Amending and supplementing Clause 1 of Article 16 as follows:

"1. When borrowing short-term foreign funds or implementing foreign loans arising from the issuance of Letters of Credit by credit institutions or foreign bank branches, the borrower must ensure compliance with the legal provisions on safety ratios in the Law on Credit Institutions at the end of the three most recent months prior to signing the foreign loan agreement or the agreement to increase the value of the foreign loan, except for the case specified in point c, Clause 2 of this Article."

Article 2. Responsibility for Implementation

The Director of the Office, Heads of Departments under the State Bank of Vietnam, heads of units under the State Bank of Vietnam, credit institutions, foreign bank branches, enterprises, cooperatives, and cooperative unions are responsible for organizing the implementation of this Circular.

Article 3. Implementation Provisions

1. This Circular takes effect from July 1, 2024.

2. AMEND Clause 1 of Article 11 of Circular No. 12/2022/TT-NHNN dated September 30, 2022, issued by the Governor of the State Bank of Vietnam guiding foreign exchange management for foreign borrowing and repayment by enterprises as follows:

"1. Medium and long-term foreign loans, except for foreign loans arising from documentary credit transactions of credit institutions and foreign bank branches".