Joint Circular No. 21-LB-NH-NT-TC on the handling of certain issues related to commercial lending activities of banks with state budget revenue tasks and ensuring operating capital for state trading units.

JOINT CIRCULAR

Regarding the resolution of certain issues related to the commercial lending activities of banks with the state budget submission tasks and ensuring business capital for state trading units

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First, the Joint Ministry deems it necessary to reiterate the following points:

Banks provide loans for circulation and reserve goods to state trading units with independent economic accounting according to plans approved by the Ministry or Provincial/Departmental Trade Authorities. The loans must be secured by goods and materials. State trading units must effectively utilize state-provided capital and bank loans in accordance with approved standards. On the basis of good use and application of capital, these trading units must complete their business and financial plans, fulfill their obligations to the state budget, and repay bank loans. In terms of finance and banking functions, based on their respective responsibilities and financial and credit principles, they must closely cooperate to strengthen supervision and serve fully capitalized trading organizations, creating favorable conditions for the trading sector to successfully complete its business and financial plans, and implement economic accounting systems well.

Regarding the content of state-owned commercial lending work, the State Bank of Vietnam has issued measures for "Providing loans for circulation and reserve goods under special loan accounts" and will issue detailed circulars later. However, to promptly address current issues, the Joint Ministry stipulates specific measures regarding the principles related to the commercial lending activities of banks with the state budget submission tasks and ensuring business capital for state trading units with independent economic accounting, aiming to assist localities in resolving existing issues.

1. The issue of deducting sales tax interest fees:

Sales circulation fees, taxes, and sales interest are reflected as the difference between selling prices and purchase prices. Banks do not lend these types but, at specified intervals of three days, five days, or ten days, banks allow trading units to deduct these amounts and transfer them to their deposit accounts for use. Upon receiving the deducted amount, trading units must immediately pay sales taxes and interest to the state budget according to the planned ratio because these taxes and interests have been predetermined. The deduction amount is based on the actual sales revenue submitted to the bank during that period and the aggregated plan ratio for circulation fees, sales taxes, and interest approved by the Ministry or the unit's supervising Provincial/Departmental Authority. This aggregated plan ratio is usually approved by the Ministry or Provincial/Departmental Authority as an average for the entire year or each quarter. To ensure the deducted amount is relatively consistent with the unit's monthly needs for circulation fees, taxes, and interest, trading units should base their monthly aggregated plan ratios on the quarterly averages already approved and request deductions according to the monthly plan ratios.

During the process of deducting according to the aggregated plan ratio for circulation fees, sales taxes, and interest, there may be discrepancies. Therefore, once the trading unit completes its monthly asset summary and profit and loss analysis, the bank will base its calculations on the actual aggregated ratio (including the actual circulation fee ratio, tax ratio, and sales interest ratio reflected in the profit and loss analysis) and the actual sales revenue submitted to the bank to either increase the deduction (if the actual ratio is higher than the planned ratio), or reduce the amount from the unit's deposit account (if the actual ratio is lower than the planned ratio). The bank does not deduct absolute amounts for circulation fees, sales taxes, and interest shown on the profit and loss analysis tables, as the sales revenue figures on these tables often do not match the actual sales revenue submitted to the bank.

While deducting the difference between selling and purchasing prices as mentioned above, several issues need to be actively resolved.

a) All sales revenues of trading units must be fully deposited into the bank, absolutely not to be used for other expenditures including procurement and other expenses. For trading units far from bank branches, if it is necessary to retain funds, they must have a unified plan with the bank, specifying a fixed amount to be retained each month. This retained amount is considered as the unit having deposited the sales revenue into the bank and also as the bank having provided a loan. Within the month, these stores can only retain within the specified limit and at the end of the month, they must settle with the bank, reporting clearly how much was used for procurement and how much for fees. The portion used for procurement, the bank will lend as usual, while the portion used for fees, the bank will deduct from the fees deducted. The loan portion used for fees, the bank does not charge interest. Units retaining funds without principle must bear responsibility for credit discipline, and the unauthorized retained amount will be treated as overdue debt.

b) Until independent economic accounting is implemented down to county-level stores, currently, all daily sales revenues of state trading stores must be fully deposited into bank branches, and these branches must immediately transfer the money to the provincial managing companies. For counties far from the province, it is necessary to organize daily electronic fund transfers. The cost of electronic fund transfers is borne by the bank as operational costs.

c) Must further intensify the work of bank payment. Business units must conclude specific contracts with other customer units as well as between level I and level II; they must strictly comply with the bank payment regulations of the Council of Ministers; they must properly enforce payment discipline, and banks must further strengthen their payment functions to ensure timely processing of "Collection and Payment" transactions to promote rapid circulation of trade capital and release idle capital stuck in the payment stage.

Regarding the issue of advance payment for expenses and transferring sales proceeds from stores to companies, the Financial Accounting Bureaus of the Ministry of Internal Trade and the Bank will discuss and formulate specific measures for implementation.

2. The issue of budget payments for price increases and processing fee differences:

a) Price increase differences: When the State decides to increase prices on certain goods, business units must inventory these goods currently in stock and revalue them according to the new prices. In principle, Finance does not accumulate additional price increase amounts for goods whose quantities in reserve were already determined when approving the average inventory levels. For ease of payment, in this case, the Bank will lend the entire 100% of the price increase amount for the unit to pay to the budget, but simultaneously, the budget will provide the unit with a portion of the funds based on the budget's participation rate in inventory, while the remaining amount will be transferred to the Bank as additional working capital for the Bank.

If the quantity of goods subject to price increases, upon revaluation, exceeds the average inventory level set by standards and still falls within the planned inventory, the portion within the standard will be handled as described above, whereas the price increase portion of the excess inventory will be financed by the Bank for the unit to pay to the budget. For example, if the average inventory standard for bicycles is 100 units, with a price increase difference of 30 dong per unit, and upon revaluation, there are 120 bicycles in stock, which remain within the planned inventory, then the total price increase amount is 30 dong x 120 = 3,600 dong. The price increase amount within the standard is 30 dong x 100 = 3,000 dong, and the price increase amount exceeding the standard is 30 dong x 20 = 600 dong. If the financial participation ratio in inventory is 30% and the Bank's is 70%, the lending and payment process will be as follows:

The Bank will lend the unit 3,600 dong to pay to the budget, while the budget will provide additional inventory funding to the unit: 3,000 dong x 30% = 900 dong, and transfer additional working capital to the Bank: 3,000 dong - 900 dong = 2,100 dong, while the unit also repays the Bank the 900 dong.

The remaining amount will be actually collected by the budget at 600 dong.

To facilitate lending and budget payments in localities whenever the State decides to increase prices, the relevant ministries will convene meetings and develop detailed plans to guide localities in implementation.

As for the price increase differences that business units have yet to pay to the budget this year, the Bank will lend these units the difference to pay to the budget. Subsequently, finance will provide 30% (for the unit to repay the Bank) and transfer 70% of the price increase difference of those goods that have been increased in price, based on the actual inventory as of December 31, 1962. For example, as of December 31, 1962, the unit's inventory contains 100 bicycles (goods that have been increased in price), with a price increase difference of 30 dong per unit. The total price increase is 3,000 dong, so finance will provide 900 dong (30%) to the trade unit and 2,100 dong to the Bank to supplement working capital.

b) Processing fee differences:

In principle, the Bank will lend the processing fee differences as if it were lending inventory financing for goods that can be sold and are reasonably stocked according to plan. However, for goods in inventory that are overstocked beyond the plan or deemed unsellable, the Bank will not lend the processing fee differences for these items. When deciding on unsellable goods, there must be agreement between Finance and Commerce and the Bank. Currently, the Ministry of Internal Trade has issued directives for facilities to refrain from processing production or purchasing goods deemed unsellable, and the Central Bank has also issued directives for local banks to closely monitor the processing stage and not lend processing costs for goods deemed difficult to sell. Therefore, starting from December 1962, the Bank will lend the processing fee differences arising from December 1962 onwards for submission to the budget.

As for processing fee differences up to November 30, 1962, which trade units have not paid to the budget, each enterprise must resolve the backlog to confirm the financial capital to be provided and the Bank will lend to enable enterprises to settle the processing fee differences with the budget.

3. The issue of covering losses, compensating price reduction differences, and refunding excess profits paid:

To help business units maintain sufficient operating capital, after each month or quarter, once the unit completes its balance sheet or asset summary, the Finance Departments and Commerce Departments will preliminarily determine the amount to be covered and refunded. If the unit incurs losses, experiences price reduction differences, or pays excess profits to the budget, the Finance Departments will immediately provide loss coverage, price reduction compensation, and refund excess profits to the units, no later than five days after receiving the balance sheets and summaries. Any discrepancies discovered during review will be adjusted subsequently. The funds provided for coverage will be repaid by the trade units to the Bank.

4. The issue of resolving loans from the Bank for insufficient material guarantees:

Providing loans with material collateral is one of the fundamental principles of socialist credit; business units must use funds properly and comply strictly with financial regulations to ensure this principle. Monthly and quarterly, the Bank will base its calculations on the balance sheet and asset summary of the business unit to determine the inventory collateral surplus for the Bank's outstanding debt. In cases where the borrower lacks material collateral for the loan, the Bank must work with the borrowing unit to identify the cause and propose measures to recover the missing material collateral.

Typically, the lack of material collateral in borrowing units is due to several main reasons:

1. Using circulating capital for non-commodity capital, fixed capital, or specialized capital.

2. Loss or damage of assets, advances to farmers, advances to staff that are difficult to collect...

3. Commodity circulating capital being occupied by customers as overdue debts.

4. Goods accumulating, selling slowly, deteriorating quality without resolution.

5. Losses not covered or excess profits not refunded.

Measures to recover the debt will vary depending on the cause. For the first cause, in addition to bearing credit discipline, the unit and especially those who ordered such actions must face disciplinary action from the Ministry of Commerce. The unit must provide detailed explanations of the issues to the Ministry of Commerce for joint study and resolution with the Ministry of Finance, or submission to the Council of Ministers for resolution. For causes 2, 3, and 4, a council must be promptly established to handle the matter according to the regulations on resolving asset losses. For the fifth cause, it will be resolved according to Article 3 mentioned above...

Depending on each case, the deadline for recovery shall be specified, but it shall not exceed six months at most.

Each time calculating collateral, the Bank and the borrowing unit must jointly prepare a record detailing the calculation figures, analyzing the reasons for insufficient collateral, and the measures and timeframe for resolution.

When there is a shortage of material collateral, the Bank should consider the deposit account of the unit; if the unit has excess funds in its deposit account, the Bank can negotiate with the unit to withdraw a certain amount to partially repay the shortage of material collateral, while the remaining portion will be transferred to overdue debt and handled as previously stated.

Depending on the specific circumstances proposed by the borrowing unit, particularly for units with good business and financial performance, local bank management may temporarily postpone transferring a certain amount to overdue debt if they believe the unit can repay quickly, but not more than one month.

5. Implementation of purchase and sale plans and inventory reserves according to plan:

Business units are not allowed to purchase or process goods that are difficult to sell; the Bank will also not lend to business units to purchase such goods; therefore, when lending, the Bank needs to closely monitor the types of goods purchased and processed.

Business units need to actively purchase and sell, maintaining inventory reserves within the approved level. The Bank will not participate in funding for inventory exceeding the plan. If inventory reserves must exceed the plan due to special, unexpected, and objectively verifiable reasons, the Bank will lend the excess according to temporary needs; the unit must actively sell to reduce inventory levels to the planned level within the specified period. Pure retail units must not exceed inventory reserves beyond the plan. For wholesale companies and purchasing units, the Bank will lend to meet the purchase of agricultural products and foodstuffs, but inventory reserves must still be maintained according to the plan. If these units need to exceed inventory reserves beyond the plan for specific objective reasons, they must report to the Ministry of Commerce for approval, and local banks must seek approval from the Central Bank before lending.

6. Issues related to the preparation of balance sheets, asset summaries, and final asset statements of business units:

Business units with independent economic accounting must regularly prepare monthly balance sheets, quarterly asset summaries, and annual final asset statements according to the deadlines set by the state. Timely preparation of these statements is crucial for business and financial management, tax collection, and banking credit operations, and is also part of the state's economic accounting regulations. Therefore, to encourage business units to comply with these regulations, from now on, if a unit fails to prepare these statements by the deadline, the Ministry of Commerce and the Ministry of Finance will not continue to provide additional capital when needed, nor will the Bank continue to lend for business purposes. However, before implementing this decision, local banks will discuss with borrowing units to specify a reasonable period, up to three months, for the unit to prepare the statements on time. If the unit fails to prepare the statements within the specified period, the Bank will not have the conditions to continue lending.

The relationship between finance, banking, and commerce in the business and financial operations of state trading units is very close, and generally, there are state regulations, principles, and rules governing them.

Above, the inter-ministerial body has highlighted and addressed some current issues between financial, banking, and commercial units in various regions.

The inter-ministerial body hopes that the directors of departments, heads of provincial and municipal financial and commercial bureaus, and branch managers of banks in regions and provinces will study and implement this circular. This circular must be disseminated down to all bureaus and finance offices, trading companies, and stores, as well as bank branches and sub-branches.