Circular No. 29/2014/TT-NHNN guides commercial banks in coordinating with the Vietnam Development Bank in implementing the guarantee mechanism for small and medium-sized enterprises borrowing capital as stipulated in the Guarantee Regulation issued together with Decision No. 03/2011/QĐ-TTg of the Prime Minister.

CIRCULAR

Guidelines for commercial banks to coordinate with the Vietnam Development Bank in implementing the guarantee mechanism for small and medium-sized enterprises borrowing capital as stipulated in the Guarantee Regulation issued together with Decision No. 03/2011/QĐ-TTg of the Prime Minister Vietnam in implementing the guarantee mechanism for small and medium enterprises borrowing funds in accordance with the Guarantee Regulations issued together with Decision No. 03/2011/QĐ-TTg of the Government Prime Minister vừa vay vốn theo quy định tại Quy chế bảo lãnh ban hành kèm theo Quyết định số 03/2011/QĐ-TTg của Thủ tướng Chính phủ

Pursuant to the Law on the State Bank of Vietnam No. 46/2010/QH12 dated June 16, 2010;

No. 06/2013/UBTVQH13 dated March 18, 2013;

Pursuant to Decree No. 156/2013/NĐ-CP dated November 11, 2013, of the Government stipulating the functions, tasks, powers, and organizational structure of the State Bank of Vietnam;

Pursuant to Decree No. 56/2009/NĐ-CP dated June 30, 2009 of the Government on assistance for the development of small and medium enterprises;

Pursuant to Decision No. 03/2011/QĐ-TTg dated January 10, 2011 of the Prime Minister on the issuance of the Guarantee Regulation for small and medium-sized enterprises borrowing capital from commercial banks;

At the proposal of the Director of the Department of Credit for Economic Sectors;

The Governor of the State Bank of Vietnam issues this Circular guiding commercial banks to coordinate with the Vietnam Development Bank in implementing the guarantee mechanism for small and medium-sized enterprises borrowing capital as stipulated in the Guarantee Regulation issued together with Decision No. 03/2011/QĐ-TTg of the Prime Minister.

PART I
GENERAL PROVISIONS

Article 1. Scope of Regulation

This Circular guides commercial banks to coordinate with the Vietnam Development Bank (hereinafter referred to as the Vietnam Development Bank) in implementing the guarantee mechanism for small and medium-sized enterprises borrowing capital as stipulated in the Guarantee Regulation issued together with Decision No. 03/2011/QĐ-TTg dated January 10, 2011 of the Prime Minister (hereinafter referred to as the Guarantee Regulation).

Article 2. Applicability

1. State-owned commercial banks, joint-stock commercial banks, joint venture banks, foreign banks operating in Vietnam with 100% foreign ownership, and branches of foreign banks operating in Vietnam (hereinafter referred to as the lender).

2. Enterprises that are the objects of Vietnam Development Bank's guarantee for borrowing capital under the category of small and medium-sized enterprises (excluding micro-enterprises) as stipulated in Decree No. 56/2009/NĐ-CP dated June 30, 2009 of the Government on assistance for the development of small and medium-sized enterprises (hereinafter referred to as the borrower).

3. The Vietnam Development Bank and other organizations and individuals involved in the implementation of the Guarantee Regulation.

2. Households may only borrow unsecured loans for commercial forest planting and livestock development as prescribed in Article 4 of this Circular from one of the two Banks and must comply with the guidance of the provincial People's Committee regarding the identification of tree species and livestock breeds based on local conditions.

1. A production and business project considered for lending with the Vietnam Development Bank's guarantee is a project within the industries and sectors specified in Clause 2, Article 3 of the Guarantee Regulation.

2. The lender considers and decides to lend projects of borrowers guaranteed by the Vietnam Development Bank according to current laws on lending by credit institutions to customers, provisions of this Circular, and related laws.

Chapter II
SPECIFIC PROVISIONS

Article 4. Coordination Agreement

1. The lender and the Vietnam Development Bank shall enter into a written coordination agreement (hereinafter referred to as the Coordination Agreement) before signing a credit contract, including the following contents: Procedures for coordination among parties in receiving and processing loan requests with guarantees from the borrower; providing disbursement documents; inspecting the use of borrowed funds and assets formed from borrowed funds (referred to as loan fund inspection); adjusting repayment terms, extending debt; performing guarantee obligations.

2. The lender, the Vietnam Development Bank, and the borrower shall enter into a written agreement to ensure that the lender has the right to accept and process collateral in cases where the Vietnam Development Bank refuses to fulfill its guarantee obligations in accordance with this Circular and relevant laws.

Article 5. Notification of Loan Approval

1. The notification of loan approval is a document established by the lender to inform the customer about the approval for lending if the loan is guaranteed by the Development Bank. The notification of loan approval does not have the value to replace the credit contract of the loan.

2. The contents of the notification of loan approval serve as the basis for the Development Bank to sign the guarantee contract and issue the guarantee certificate for the customer's loan. The contents in the notification of loan approval, the guarantee contract, and the guarantee certificate must be consistent and comply with current laws related to lending and guarantees for customers.

3. The notification of loan approval includes the following basic contents: Customer name, project name, purpose of using the loan capital, total actual project funds (including equity capital, bank loans, and other sources of funds), total approved loan amount (including the amount of loan guaranteed by the Development Bank, the amount of loan secured by other measures or without applying security measures), loan term, repayment period, provisions on disbursing the loan capital, validity period of the loan approval notification (if any). In case there is a validity period specified, the lender will only consider signing a credit contract with the customer within the validity period of the loan approval notification.

Article 6. Signing Credit Contract

Within seven working days from the date of receipt of the original guarantee certificate issued by the Development Bank, the lender shall examine and implement:

1. Signing a credit contract with the customer if the contents of the guarantee certificate are consistent with the contents of the loan approval notification.

2. Notifying the customer and the Development Bank in writing if the lender disagrees to sign the credit contract, stating the reasons for refusing to sign the credit contract, and simultaneously returning the original guarantee certificate to the Development Bank.

Article 7. Disbursement, Inspection of Customer's Loan Capital

1. Providing disbursement certificates: The lender must provide copies of disbursement certificates and relevant files for each disbursement of the loan capital to the Development Bank immediately as a basis for coordinated inspection of the loan capital.

2. Inspecting the loan capital: The lender and the Development Bank agree on the time to conduct coordinated inspections of the loan capital to ensure supervision of the customer's use of the loan capital and assets formed from the loan capital according to the intended purpose. The loan capital inspection must be recorded in a report. The loan capital inspection report serves as the basis for the Development Bank to fulfill its guarantee obligations.

Article 8. Adjustment of Repayment Period, Extension of Debt

1. The lender examines the customer's request to adjust the repayment period and extend debt according to current laws based on agreement with the Development Bank.

2. The process of implementing the adjustment of the repayment period and extension of debt for the customer is as follows:

a) The lender sends a document to the Development Bank regarding the plan to adjust the repayment period and extend debt for the customer;

b) Within seven working days from the date of receipt of the document from the lender, the Development Bank has the responsibility to reply in writing to the lender regarding the agreement or disagreement with the plan to adjust the repayment period and extend debt of the lender. If agreed, the Development Bank will amend and supplement the guarantee certificate for the loan in accordance with the content of the plan to adjust the repayment period and extend debt of the lender;

c) The lender will only implement the adjustment of the repayment period and extension of debt for the customer upon receiving a document from the Development Bank approving the adjustment of the repayment period and extension of debt and amending the contents in the guarantee certificate related to the adjustment of the repayment period and extension of debt of the customer.

Article 9. Performance of Guarantee Obligations

1. The Development Bank shall be responsible for performing its guarantee obligations towards the lender in accordance with the provisions of the guarantee certificate and relevant laws governing the guarantee.

2. The lender and the Development Bank shall agree in writing on specific cases where the Development Bank may refuse to perform its guarantee obligations as stipulated in Clause 4, Article 19 of the Guarantee Regulation based on the following principles:

a) The Development Bank may refuse to perform the entire guarantee obligation when the lender disburses part or all of the loan funds not in accordance with the intended purpose.

b) In the case where the lender disburses the loan funds in accordance with the intended purpose but fails to properly monitor and supervise the use of the loan funds and assets formed from the loan funds for the customer, leading to the customer using the loan funds and assets formed from the loan funds not in accordance with the intended purpose, the Development Bank may only refuse to repay the corresponding amount of loan funds and assets formed from the loan funds that the customer has misused.

3. Within seven working days from the due date of the loan repayment if the borrower is unable to repay the debt or repay the debt incompletely or not on time, the lender shall be responsible for clearly identifying the reasons why the borrower cannot repay the debt, applying measures to recover the debt as prescribed, and submitting a written request along with the file to the Development Bank to fulfill the guarantee obligations it has committed to under the Guarantee Regulation and the guidance provided in this Circular.

4. Within thirty days from the date of receipt of the written request from the lender to perform the guarantee obligations, the Development Bank must complete the performance of the guarantee obligations it has committed to. In the event of refusal to perform the guarantee obligations, the Development Bank must send a written notice to the lender detailing the reasons for refusal. If the Development Bank does not provide a written refusal within thirty working days from the date of receipt of the written request from the lender, it will be deemed to have accepted the performance of the guarantee obligations it has committed to.

5. Within seven working days from the date of receipt of the written refusal from the Development Bank, the lender must submit a written response accepting or rejecting the Development Bank's refusal. If there is no written response sent to the Development Bank beyond this period, the lender will be deemed to have accepted the Development Bank's refusal.

Article 10. Transfer of Collateral Assets

Upon receipt of the lender's written approval of the refusal to perform the guarantee obligations, the Development Bank shall handle the borrower's collateral assets as follows:

1. In the case of refusing to perform the entire guarantee obligation: The Development Bank immediately transfers the right to receive and dispose of the borrower's collateral assets to the lender in accordance with the Cooperation Agreement specified in Clause 2, Article 4 of this Circular. The lender returns the original guarantee certificate to the Development Bank after the Development Bank has transferred the collateral assets.

2. In case of refusal to fulfill part of the guarantee obligation:

a) For the portion of the guarantee obligation that is approved: The Development Bank immediately performs the debt repayment on behalf of the borrower (including principal and interest).

b) For the portion of the guarantee obligation that is not approved: The Development Bank collaborates with the lender to handle the borrower's collateral assets. The proceeds from the disposal of the collateral assets, after deducting related costs associated with the disposal process, will be paid out according to the ratio of the outstanding debt at the guarantor (the repaid portion) and the outstanding debt at the lender (the refused portion). In the event that, after fully repaying the principal, interest, and related costs arising from the loan, there remains money from the proceeds of the collateral asset disposal, the Development Bank will transfer it into the borrower's deposit account.

Article 11. Classification and Provision for Risk

The lender shall implement classification, provision, and utilization of provisions to handle risks associated with loans in accordance with the regulations of the State Bank of Vietnam and relevant laws.

Article 12. Handling Violations

1. Organizations and individuals violating the provisions of this Circular, relevant laws, depending on the nature and degree of violation, will be subject to legal sanctions as prescribed by law.

2. During the loan process, if the lender discovers that the borrower violates agreements in the credit contract, violates the law, or receives a document from the Development Bank requesting the lender to terminate the loan and recover the debt ahead of schedule as stipulated in Point d Clause 1 Article 16 of the Guarantee Regulation, the lender shall immediately terminate the loan and promptly recover the debt ahead of schedule. The credit contract can only continue to be implemented once the specific cause, degree of violation, and the resolution of the violation have been determined, ensuring it does not affect the effectiveness of the project, the ability of the borrower and the Development Bank to repay the loan, and the Development Bank has issued a document agreeing to continue implementing the credit contract.

Article 13. Reporting Information

1. Monthly, the lender shall compile the situation of lending to small and medium-sized enterprises guaranteed by the Development Bank according to Decision No. 03/2011/QD-TTg on the State Bank of Vietnam in accordance with the current reporting and statistical system regulations of the Governor of the State Bank of Vietnam applicable to units under the State Bank of Vietnam and credit organizations, foreign bank branches.

2. On the 10th of each month, the Development Bank shall compile and report the guarantee situation for small and medium-sized enterprises borrowing funds from lenders to the State Bank of Vietnam (Department of Credit for Economic Sectors) using the Report Form for Guarantee Situation for Small and Medium-Sized Enterprises Borrowing Funds at Commercial Banks and Foreign Bank Branches accompanying this Circular.

Chapter III
IMPLEMENTING PROVISIONS

Article 14. Responsibilities of the Lender and Units Under the State Bank of Vietnam

1. The lender:

a) Closely cooperate with the Development Bank to implement loans to small and medium-sized customers guaranteed by the Development Bank as prescribed in this Circular and relevant laws, ensuring safety and compliance with legal regulations;

b) During implementation, if there are any difficulties or obstacles, the lending banks shall compile and report them to the State Bank of Vietnam (Department of Credit for Economic Sectors).

2. Units under the State Bank of Vietnam:

a) Department of Credit for Economic Sectors:

- The focal point for monitoring and compiling the situation of lending activities by banks to small and medium-sized enterprises guaranteed by the Development Bank.

- Lead in handling any issues arising during the implementation of this Circular.

b) Banking Inspection and Supervision Authority shall conduct inspections, supervision, and enforcement within their authority regarding the compliance of all parties involved in the implementation of the Guarantee Regulation and this Circular when providing loans to small and medium-sized enterprises guaranteed by the Development Bank;

c) Department of Finance and Accounting shall guide lending banks in accounting for loan transactions guaranteed by the Development Bank;

d) The State Bank of Vietnam branch in provinces and centrally-administered cities shall conduct inspections, supervision, and enforcement within their authority regarding the lending activities of banks on their territory to small and medium-sized enterprises guaranteed by the Development Bank, and propose solutions to the Governor of the State Bank of Vietnam and the Chairman of the People's Committee of provinces and centrally-administered cities to address any emerging issues.

Article 15. Effective Date

1. This Circular takes effect from October 10, 2014.

2. Circular No. 12/2009/TT-NHNN dated May 28, 2009 on guiding certain contents related to loans guaranteed by the Development Bank under the Guarantee Regulation for Enterprises Borrowing Funds from Commercial Banks issued pursuant to Decisions No. 14/2009/QD-TTg and No. 60/2009/QD-TTg of the Prime Minister ceases to be effective from the date this Circular takes effect.

3. For credit contracts signed before the date this Circular takes effect, they shall continue to be implemented according to the agreements already signed until the expiration of the contract term.

Article 16. Implementation Organization

The Head of the Office, Heads of the Department of Credit for Economic Sectors, Heads of units under the State Bank of Vietnam, Governors of the State Bank of Vietnam branches in provinces and centrally-administered cities; Chairmen of the Board of Directors, Chairmen of the Board of Members, General Managers (Directors) of commercial banks, foreign bank branches, small and medium-sized enterprises borrowing funds, and the Development Bank are responsible for organizing the implementation of this Circular./.

REPORT ON GUARANTEE SITUATION FOR SMALL AND MEDIUM-SIZED ENTERPRISES BORROWING FUNDS
AT COMMERCIAL BANKS PURSUANT TO DECISION NO. 03/2011/QD-TTG DATED JANUARY 10, 2011

Month......Year...

(Accompanying Circular No. 29/2014/TT-NHNN dated October 9, 2014 of the State Bank of Vietnam)

Unit: Million dong

Instructions for Preparing the Report:

- Reporting Object: The Development Bank of Vietnam compiles monthly data from the entire system to submit the report to the State Bank of Vietnam (Department of Credit for Economic Sectors)

- Recipient of the Report: Department of Credit for Economic Sectors - State Bank of Vietnam (email: [email protected]; Tel: 04 38255643; Fax: 04 38256626).

- Deadline for Submission: No later than the 10th of the following month.

- Please clearly state the name and phone number of the preparer.

- During implementation, if there are any issues, please promptly reflect them in writing or via phone number 04 38255643.

- Columns (4), (6), (8), (10), (12), (13) only calculate cumulative figures from the beginning of the reporting year to the reporting period.