Decision No. 367/QD-NH5 On the issuance of the Rules on medium and long-term credit

Pursuant to …;

REGARDING THE ISSUANCE OF THE REGULATIONS ON MEDIUM-TERM AND LONG-TERM CREDIT

GOVERNOR OF THE STATE BANK OF VIETNAM

Pursuant to the Ordinance on the State Bank of Vietnam and the Ordinance on Banks, Credit Cooperatives and Financial Companies issued pursuant to Decree No. 37/LCT-HĐNN8 and Decree No. 38/LCT-HĐNN8 dated May 24, 1990 of the Chairman of the Council of State of the Socialist Republic of Vietnam;

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

At the proposal of the Director of the Economic Research Department;

DECISION:

Article 1. The Regulations on Medium-Term and Long-Term Credit are hereby promulgated together with this Decision.

Article 2. This Decision shall take effect from the date of signing and replace the following Decisions: Decision No. 23/NH-QĐ dated March 6, 1991 of the Governor of the State Bank of Vietnam on the issuance of the Regulations on Medium-Term and Long-Term Credit for economic organizations and Decision No. 273/QĐ-NH1 dated December 8, 1992 of the Governor of the State Bank of Vietnam on amending loan conditions.

Article 3. The Director of the Governor's Office, the Inspector General, Heads of units under the Central State Bank, Governors of Provincial and Municipal Branches of the State Bank, and General Directors (Directors) of credit organizations are responsible for implementing this Decision.

REGULATIONSON MEDIUM-TERM AND LONG-TERM CREDIT

(Issued together with Decision No.: 367/QĐ-NH dated December 21, 1995 of the Governor of the State Bank of Vietnam)

I. GENERAL PROVISIONS

Article 1. In these Regulations, the following terms are understood as follows:

1- Lender: is a credit organization, including: State-owned commercial banks, Investment and Development Banks, Joint Stock Commercial Banks, Joint Venture Banks, Branches of Foreign Banks in Vietnam, Financial Companies, Credit Cooperatives, established and operating in accordance with the Ordinance on Banks and People's Credit Funds.

2- Borrower: is a legal entity and individual engaged in production and business activities in accordance with Vietnamese Law, including: State-owned enterprises, joint stock companies, limited liability companies, cooperatives, private businesses, joint ventures with foreign countries, wholly foreign-owned enterprises in Vietnam, individual producers, and household producers.

3- Investment Project: is a set of proposals based on scientific and practical grounds regarding the investment of capital to build new, expand, renovate, and modernize technology and equipment of fixed assets in order to achieve growth in quantity, improvement, or enhancement in quality of products or services within a certain period of time.

4- Total Investment Amount: is the planned investment capital cost for the entire investment process aimed at achieving the investment objectives to put into operation according to project requirements (including inflation factors).

5- Credit Contract: is an economic contract signed between the lender and the borrower regarding medium-term and long-term loans; a promissory note is a form of credit contract.

6- Joint Loan Agreement for Medium-Term and Long-Term Loans: is a document signed between two or more lenders to jointly provide a loan for an investment project of the borrower.

7- Medium-Term Credit: is a type of loan with a term of over one year up to three years; Long-Term Credit: is a type of loan with a term of over three years but not exceeding the necessary depreciation period of the asset formed by the loan.

Article 2. These Regulations apply to medium-term and long-term credit in Vietnamese Dong and foreign currency.

Article 3. Sources of funds for lending

The lender uses the following sources of funds for medium-term and long-term lending:

1- Own capital and Reserve Fund.

2- Capital raised and borrowed domestically and internationally for a term of one year or longer.

3- A portion of domestic capital raised with a term of less than one year as specified by the Governor of the State Bank of Vietnam for each period.

4- Entrusted capital and sponsored capital for lending under programs or investment projects of the State, economic-financial-credit-social organizations both domestically and internationally.

Article 4. Purpose of Loan

The lender provides medium-term and long-term loans to the borrower for investment in new construction projects, expansion, renovation, restoration, technological innovation, and application of science and technology with the aim of profit, in accordance with state policies on economic and social development and laws.

Article 5. The borrower may obtain loans from one credit institution or multiple credit institutions as stipulated in these Regulations.

Article 6. Principles of Credit:

1- Borrowed funds must be used for their intended purpose and effectively.

2- Credit relationships shall be carried out based on agreements between the lender and the borrower under economic contract systems within the framework of the Law and these Regulations.

3- Borrowed funds must be fully repaid, including both principal and interest, according to the agreed terms.

Article 7. Loan Conditions

The borrower must meet the following conditions:

1. Have legal personality or be an individual with sufficient capacity for acts and legal capacity to engage in production, business operations, and services in accordance with the industry specified in the business license or business registration certificate and the provisions of Vietnamese law.

2. Engage in profitable production and business operations.

3. Must have self-funded capital invested in the project, the specific amount being determined by the General Director (Director) of the credit institution.

4. Must provide collateral or pledge assets or third-party guarantees in accordance with the Collateral, Pledge, and Guarantee Regulations of the Governor of the State Bank.

5. Must purchase insurance for assets formed with borrowed funds at a legally operating insurance company in Vietnam if such assets require insurance, and commit to using any compensation received due to risks to repay the credit institution. Cases where insurance is not required are determined by the General Director (Director) of the credit institution.

6. Maintain accounting, bookkeeping, and financial management in accordance with the Accounting and Statistics Ordinance and the Charter of the economic organization.

7. Comply with the State's Investment and Construction Management Ordinance and the regulations of these Regulations.

8. For corporate borrowers, in addition to the conditions stipulated above, they must have remaining operational time as per the establishment decision or business license consistent with the duration of medium-term and long-term loans.

Article 8. Borrowing Objectives

These are costs constituting the total investment level of new construction, expansion, renovation, restoration, technological innovation, and scientific and technological application projects, including: value of materials, machinery, equipment, transferred technology, patents, and inventions; labor costs; rental and transfer fees for land; rental purchase prices for other assets within the legal framework: insurance costs for assets belonging to the investment project; other costs.

Article 9. The loan amount for an investment project of the borrower equals the total investment capital of the project minus the self-funded investment capital of the borrower, but the maximum amount cannot exceed 70% of the value of the collateral.

Article 10. The loan term is determined based on the production and business cycle, the repayment ability of the investment project, the income capability of the borrower, and the nature of the lender's capital source.

The loan term runs from the date the borrower begins receiving the loan to the date all debt is repaid to the lender, as committed by both parties in the credit contract.

Article 11. The loan interest rate shall not exceed the ceiling interest rate set by the Governor of the State Bank. In cases of entrusted loans, it shall be implemented according to the designated or agreed-upon interest rate with the entrusting party.

Article 12. The lender shall not provide medium-term and long-term loans to the borrower plus the outstanding short-term loan balance exceeding 10% of its own equity and reserve fund; the total loan amount for the ten largest borrowers shall not exceed 30% of the total outstanding loan amount of that lender.

The lender shall not grant preferential lending terms to the borrower as stipulated in Article 30 of the Banking Ordinance, Cooperative Credit Societies, and Financial Companies.

Article 13. If the lender provides foreign currency loans to the borrower, both parties must comply strictly with the state's foreign exchange management regulations regarding the provision, use, accounting, conversion, repayment of foreign currency loans. 

II. SPECIFIC PROVISIONS

Article 14. To obtain a loan, the borrower must submit to the lender:

1- A loan application form.

2- Legal documentation about the borrower and proof of registered capital and initial investment capital.

3- Financial statements for the two years prior and each quarter during the year of the loan application.

4- The investment project and related documents.

5- Legal documents (originals) concerning the collateral or pledge provided by the borrower or the guarantor.

Specific types of documents and papers are determined by the General Director (Director) of the credit institution.

Article 15. Within twenty days of receiving valid loan application documents from the borrower, the lender must notify the borrower in writing of the decision to approve or deny the loan.

Article 16. The lender and borrower sign a credit agreement and complete procedures to disburse the loan according to the lender's regulations. The lender disburses the loan according to the progress of the investment project.

Article 17. Repayment of principal and interest on the loan:

1- Upon reaching the agreed repayment period, the borrower must proactively repay the full amount owed to the lender.

2- The borrower pays interest along with the principal according to the agreed repayment period or pays interest according to the agreed interest payment period.

3- Upon reaching the agreed repayment period for principal and interest, if the borrower does not proactively repay the debt, the lender has the right to deduct the amount from the borrower's deposit account to collect the debt and interest; if the borrower does not have sufficient funds to repay and is not granted an extension, the lender transfers the overdue debt to the overdue debt account and the borrower must pay the penalty interest rate on overdue debt; any unpaid interest is recorded in the off-balance sheet account without being added to the principal.

4- The borrower must inform the lender in advance when voluntarily repaying the loan ahead of schedule.

Article 18. Extension of debt, reduction of interest, waiver of interest:

1- In cases where the borrower fails to repay the debt on time due to objective reasons and submits a request for an extension, the lender will consider granting an extension; the maximum extension period is equal to one repayment period and can only be extended once per credit contract.

2- Reduction or waiver of interest on loans is decided by the General Director (Director) of the credit institution in accordance with the Loan Interest Reduction and Waiver Regulations of the credit institution approved by the Governor of the State Bank.

Article 19. Rights and Obligations of the Lender:

1- Has the right to request the borrower to provide all quarterly and annual reports on the production and business situation and information related to the loan; to inspect before, during, and after the loan regarding issues related to the loan.

2- Has the right to stop lending and recover the principal and interest of the loan ahead of schedule in the following cases:

2.1- The borrower provides false documents and information.

2.2- The borrower misuses the loan funds; suffers losses in business but cannot be remedied; has lawsuits threatening most of the borrower's assets.

2.3- The borrower is dissolved; is being dissolved; loses the ability to pay; there is a court decision initiating bankruptcy proceedings against the borrower.

2.4- The collateral or pledge of the borrower or guarantor's property for the loan no longer exists or has decreased compared to the loan amount (for collateral or pledges not stored in the lender's warehouse).

3- Has the right to auction collateral or pledges to recover the principal and interest of the loan in the following cases:

3.1- When recovering the loan ahead of schedule as mentioned in point 2 above, but the borrower is unable to repay the principal and interest of the loan.

3.2- When the final repayment date arrives, the borrower is unable to repay the principal and interest of the loan.

4- Has the right to demand the borrower to compensate for all damages arising from the borrower's failure to perform or fully perform the credit contract.

5- Initiate legal action against the borrower as prescribed by Law.

6- Fulfill all commitments with the borrower and the legal decisions regarding the loan; must compensate the borrower for any damage caused by the lender's breach of the credit contract.

Article 20. Rights and obligations of the borrower:

1- Has the right to choose, negotiate, and agree with the lender on borrowing and signing the credit contract.

2- Has the right to demand the lender to compensate for all damages arising from the lender's breach of the credit contract; initiate legal action against the lender as prescribed by Law.

3- From the day the first loan installment is received until the full repayment of the principal and interest of the loan, the borrower must submit periodic quarterly and annual reports and necessary documents related to the loan to the lender as required by the lender.

4- When the borrower changes their legal representative, the successor must assume full responsibility for the debt and interest owed and the commitments previously made by the previous legal representative.

5- When transferring ownership, splitting, or merging, the borrower must repay the full principal and interest of the loan to the lender. If the full principal and interest have not been repaid, the borrower must process the transfer of the debt and interest to the new borrower if the lender agrees in writing. The new borrower's legal representative must accept the full amount of the debt and interest and fulfill the commitments previously made by the old borrower.

6- When the principal and interest have not been fully repaid, the borrower must obtain the lender's approval when selling or liquidating investment assets funded by the loan and must immediately repay the full principal and interest after the sale or liquidation of the assets.

7- In case the credit contract is canceled or breached due to the borrower's fault, the borrower must compensate the lender for all damages.

8- Shall not use assets formed with the loan funds as collateral or pledge for another organization until the full principal and interest have been repaid.

9- Timely notify the lender of events and changes that affect or threaten the safety of the loan funds.

Article 21. In the case where two or more lenders lend to a borrower's investment project, in addition to the provisions in the aforementioned Articles, the lenders and the borrower must also comply with the following provisions:

1- The lenders must establish a Joint Appraisal Board to review the loan application documents submitted by the borrower. Legal representatives of the lenders sign the cooperation agreement for medium and long-term loans to the borrower; the content of the contract includes:

The amount each lender will lend to the borrower's project.

Disbursement period, loan term.

Loan interest rate.

Collateral, pledge, or guarantee.

Repayment periods and methods.

Provisions on the rights and obligations of the parties involved in the cooperative lending.

Provisions for resolving disputes arising from responsibilities and interests.

2- Principles for handling cases:

2.1- The total amount lent by the lenders to the borrower equals the total investment capital minus (-) the borrower's own investment capital for the project, but not exceeding 70% of the total value of the collateral or pledge provided to the lenders.

2.2- If the borrower or guarantor has valuable assets that cannot be pledged separately to each lender, the lenders must appoint one lender to represent them as the recipient of the collateral or pledge; when auctioning the collateral or pledge to recover the principal and interest, the proceeds from the auction will be divided according to the amount each lender lent to the borrower.

2.3- When the borrower breaches this Law and these Regulations or commitments to the lenders, the lenders must jointly suspend lending, recover the principal and interest ahead of schedule, or initiate legal action against the borrower as prescribed by Law.

2.4- If the lenders have disputes over the cooperative lending agreement that cannot be resolved through mediation, they may initiate legal action in the Economic Court. 

III. INSPECTION BY CREDIT ORGANIZATIONS AND HANDLING OF VIOLATIONS

Article 22. Credit organizations must inspect before, during, and after the loan regarding the use of loan funds and the management of the borrower's collateral. The borrower has the responsibility to provide data, situations, and facilitate the credit organization's inspection activities related to the loan.

Article 23. Upon discovering the borrower's violation of this Law and these Regulations, depending on the specific level of violation, the credit organization may require the borrower to correct the violation or exercise its rights as stated in Article 19 above. 

IV. IMPLEMENTATION PROVISIONS

Article 24. The credit organizations and borrowers mentioned in Article 1 above are responsible for complying with these Regulations. Based on these Regulations, the General Directors (Directors) of credit organizations shall issue detailed guidelines appropriate to the characteristics of their operations.

Heads of functional units under the State Bank of Vietnam, Branch Directors of the State Bank of Vietnam in provinces and cities are responsible for inspecting and supervising the implementation of these Regulations.

Article 25. Amendments and supplements to these Regulations shall be decided by the Governor of the State Bank of Vietnam.