Circular No. 38/2016/TT-NHNN on the method of calculating and accounting for interest income and expenditure in the activities of receiving deposits and lending between the State Bank of Vietnam and credit institutions and other organizations.

CIRCULAR

Regulations on the Method of Calculating and Accounting for Interest Income and Expenditure in the Activities of Receiving Deposits and Lending Between the State Bank of Vietnam and Credit Institutions and Other Organizations

Pursuant to the Civil Code No. 91/2015/QH13 dated November 24, 2015;

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

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Pursuant to the Accounting Law No. 88/2015/QH13 dated November 20, 2015;

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;

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

Pursuant to Decision No. 08/2013/QĐ-TTg dated January 24, 2013 of the Prime Minister on accounting regulations applicable to the State Bank of Vietnam;

At the proposal of the Director of the Finance-Accounting Department;

The Governor of the State Bank of Vietnam issues this Circular stipulating the method of calculating and accounting for interest income and expenditure in the activities of receiving deposits and lending between the State Bank of Vietnam and credit institutions and other organizations.

1. Method of calculating and accounting for interest payments on required reserve deposits, excess reserve deposits of credit institutions, and foreign bank branches; and deposits from other organizations at the State Bank of Vietnam.

2. Method of calculating and accounting for interest income from lending between the State Bank of Vietnam and credit institutions and foreign bank branches.

PART I
GENERAL PROVISIONS

Article 1. Scope of Regulation

This Circular stipulates on:

2. Credit institutions and foreign bank branches as defined in the Law on Credit Institutions (hereinafter referred to as credit institutions).

3. Other organizations that are not credit institutions and are allowed to deposit money at the State Bank according to the law (hereinafter referred to as other organizations).

Article 2. Applicability

1. The State Bank of Vietnam (hereinafter referred to as the State Bank).

Deposits of credit institutions

include required reserve deposits and excess reserve deposits of credit institutions at the State Bank.

Article 3. Explanation of Terms

In this Circular, the following terms are understood as follows:

1. Deposits of other organizations are deposits of other organizations at the State Bank.

2. Interest amount is the amount of money that credit institutions pay to the State Bank for using borrowed funds or the amount of money the State Bank pays to credit institutions and other organizations for receiving deposited funds.

3. Interest-bearing balance of credit institution deposits is the balance of excess reserve deposits or the balance of required reserve deposits maintained during the period as prescribed by the State Bank's regulations on required reserves in each period.

4. Balance of other organization deposits is the actual amount of money deposited by other organizations at the State Bank.

5. Interest accrual period is the time period calculated from the day following the disbursement date of the loan by the State Bank until the principal and interest are fully repaid, or from the day following the receipt date of the deposit by the State Bank until the principal and interest are fully paid out.

6. Interest calculation period is the time period within the interest accrual period that the State Bank uses to calculate the interest on deposits and loans for credit institutions and other organizations.

7. Actual loan balance includes the balance of on-time principal, overdue principal balance, and overdue interest used to calculate interest according to the loan agreement and legal provisions.

8. STATE BANK OF VIETNAM DEPOSIT ACCEPTANCE BUSINESS OF CREDIT INSTITUTIONS

Chapter II
SPECIFIC PROVISIONS

Section 1
THE BUSINESS OF THE STATE BANK RECEIVING DEPOSITS FROM

TCREDIT ORGANIZATIONS

Article 4. Method for Calculating Interest on Deposits of Credit Institutions

The State Bank of Vietnam and credit institutions shall calculate the amount of interest for each interest calculation period as follows:

Where:

+ Number of days maintaining the reserve requirement: is the number of days applying the same interest rate during the reserve maintenance period within the interest calculation period.

+ Interest rate: is the deposit interest rate of the credit institution decided by the Governor of the State Bank of Vietnam for each period (calculated at a percentage per annum).

Article 5. Payment of Deposit Interest by the State Bank of Vietnam

The payment of required reserve deposit interest or excess reserve deposit interest shall be carried out in accordance with the regulations of the State Bank of Vietnam on required reserves for credit institutions.

Section 2
THE BUSINESS OF THE STATE BANK RECEIVING DEPOSITS FROM

ORGANIZATIONS

Article 6. Method for Calculating Interest on Deposits of Other Entities

The State Bank of Vietnam and other entities shall calculate the amount of interest for each interest calculation period as follows:

1. The interest amount for one day is calculated according to the following formula:

The interest amount for the interest calculation period equals (=) the total daily interest amounts of all days within the interest calculation period.

2. In cases where there are more than one (01) day of maintaining the deposit balance within the interest calculation period, the State Bank of Vietnam and other entities shall calculate interest according to the following simplified formula:

Wherein: Number of days maintaining the deposit balance is the number of days when the deposit balance of other entities does not change.

3. The interest rate stipulated in Clause 1 and Clause 2 of this Article is the deposit interest rate of other entities decided by the Governor of the State Bank of Vietnam for each period (calculated at a percentage per annum).

Article 7. Payment of Deposit Interest by the State Bank of Vietnam

The payment of deposit interest for other entities shall be carried out in accordance with the regulations of the State Bank of Vietnam.

Section 3
LOAN BUSINESS

Article 8. Time of Transfer to Overdue Debt

At the end of the due date for repayment of part or all of the principal and/or interest as agreed upon in the contract, if the credit institution has not fully repaid the principal and/or interest to the State Bank of Vietnam, the State Bank of Vietnam shall transfer the overdue principal and/or interest that have not been repaid to overdue monitoring.

Article 9. Method for Calculating Loan Interest

1. Loan interest includes interest calculated on the current overdue principal balance, overdue principal balance, and overdue interest.

2. The State Bank of Vietnam and credit institutions shall calculate the amount of interest for each interest calculation period as follows:

a) The interest amount for one day is calculated according to the following formula:

The interest amount for the interest calculation period equals (=) the total daily interest amounts of all days within the interest calculation period.

b) For loans with more than one (01) day of maintaining the actual opening loan balance within the interest calculation period, the State Bank of Vietnam and credit institutions shall calculate interest according to the following simplified formula:

Wherein: Number of days maintaining the actual opening loan balance is the number of days when the actual opening loan balance does not change within the interest calculation period.

3. The interest rate stipulated in Clause 2 of this Article is the applicable interest rate for the current overdue principal balance, overdue principal balance, and overdue interest as agreed and in compliance with the regulations of the State Bank of Vietnam (calculated at a percentage per annum).

Article 10. Collection of Principal and Interest on Loans

1. The State Bank shall collect interest on loans according to agreements with credit institutions.

In cases where a credit institution must repay both principal and interest on loans within the same period without an agreement on the order of repayment of principal and interest during that period, if the credit institution fails to fully repay both principal and interest on loans as agreed, the State Bank shall recover the principal first and then the interest on the loan.

In cases where a credit institution repays before the due date without an agreement on the order of repayment of principal and interest, the State Bank shall collect the principal and interest according to the request of the credit institution.

2. For foreign currency loans, the State Bank shall collect interest in the type of foreign currency lent. If interest is collected in another type of foreign currency or in Vietnamese Dong, it shall be carried out according to the agreement between the State Bank and the credit institution in compliance with the regulations on foreign exchange management.

3. In cases where the interest collection date coincides with a weekend or public holiday, it shall be postponed to the next working day.

Section 4
ACCOUNTING WORK

Article 11. Accounting Principles

1. The State Bank and credit institutions shall account for interest on deposit and lending operations according to the accrual accounting principle and financial regulations.

2. Foreign currency income and expenses shall be converted into Vietnamese Dong or accounting currency for recording in revenue and expense accounts.

3. For the State Bank:

a) Estimated receivable and payable interest shall be calculated up to the end of the month and recorded on the last working day of the month;

b) Income from lending operations that have been recorded but not received at maturity shall be reduced from revenue (if in the same accounting period) or recorded as an expense (if in a different accounting period), and monitored off-balance sheet until received, when received, it shall be recorded as revenue;

c) Overdue interest receivable from loans does not need to be recorded as revenue. The State Bank shall monitor off-balance sheet until received, when received, it shall be recorded as revenue;

d) The person authorized to set rules for calculating and recording interest on the core banking system, accounting, budgeting, and integrated systems of the State Bank (hereinafter referred to as the accounting software system) shall comply with the provisions of this Circular and accounting laws. Interest calculation and recording shall be performed on the accounting software system based on the rules already installed.

4. For credit institutions: perform calculations and verify the accuracy of interest amounts.

Article 12. Accounting Recording

1. Deposit Operations

a) The State Bank:

(i) Record estimated payable interest: On the last day of the month, record interest in the account for paying deposit interest, the payable interest account for the interest amount of the estimated payable interest period on the accounting software system according to the accounting rules already installed as stipulated in Point d Clause 3 Article 11 of this Circular. The assigned person shall check the accuracy of transactions recorded on the system, print accounting vouchers, and store them according to regulations.

In cases where the last day of the month is a holiday, interest payable shall be calculated up to the end of the month and recorded on the last working day of the month.

(ii) Record payment of interest: At the time of interest payment, the assigned person shall enter information and data into the accounting software system according to the prescribed procedures for deposit operations. The assigned person shall check the accuracy of the transaction processed and recorded on the system, print accounting vouchers, and store them according to regulations;

b) Credit Institution:

Account for deposit operations according to the accounting and financial regulations applicable to credit institutions and relevant laws.

2. Lending Operations

a) The State Bank:

(i) Record estimated receivable interest: On the last day of the month, record in the account for receiving lending interest, the receivable interest account for the interest amount of the estimated receivable interest period on the accounting software system according to the accounting rules already installed as stipulated in Point d Clause 3 Article 11 of this Circular. The assigned person shall check the accuracy of transactions recorded on the system, print accounting vouchers, and store them according to regulations.

In cases where the last day of the month is a holiday, estimated receivable interest shall be calculated up to the end of the month and recorded on the last working day of the month;

(ii) Record receipt of principal and interest: At the time of receipt of principal and/or interest, based on the agreement in the contract and the provisions of this Circular, the assigned person shall enter information and data into the accounting software system according to the prescribed procedures for lending operations. The assigned person shall check the accuracy of the transaction processed and recorded on the system, print accounting vouchers, and store them according to regulations;

b) Credit Institution:

Account for borrowing operations according to the accounting and financial regulations applicable to credit institutions and relevant laws.

Article 13. Establishment, circulation, control, and storage of vouchers

The State Bank and credit organizations must establish complete valid and lawful vouchers, conduct checks, controls, circulation, and accounting voucher storage in accordance with the regulations of the State Bank and relevant laws.

Chapter III
IMPLEMENTATION

Article 14. Responsibilities of State Bank units

State Bank units engaged in deposit-taking and lending activities are responsible for timely and accurate calculation and accounting of income, interest payments, and debit and credit notifications to credit organizations and other entities in accordance with the provisions of the law.

Article 15. Rights and responsibilities of credit organizations

1. Credit organizations have the right to request the State Bank to provide debit and credit notifications in accordance with the provisions of the law.

2. Credit organizations are responsible for calculating and accounting in accordance with this Circular.

Article 16. Rights and responsibilities of other organizations

Other organizations have the right to request the State Bank to provide debit and credit notifications and are responsible for cooperating with the State Bank to reconcile interest amounts in accordance with the provisions of the law.

Article 17. Transitional Provisions

Interest calculation for loan and deposit contracts signed before the effective date of this Circular shall continue to be implemented according to Decision No. 652/2001/QĐ-NHNN dated May 17, 2001, issued by the Governor of the State Bank on the issuance of regulations on methods of calculating and accounting for income and interest payments of state banks and credit organizations. Any amendments or supplements to the interest calculation methods in loan and deposit contracts after the effective date of this Circular must comply with the provisions of this Circular.

After the effective date of this Circular, for contracts containing automatic extension clauses, interest calculation after extension must be carried out in accordance with the provisions of this Circular. State Bank units engaged in deposit-taking and lending activities are responsible for notifying credit organizations and other entities about changes in interest calculation, collection, and payment methods.

Article 18. Implementation Organization

1. This Circular takes effect from February 15, 2017.

2. From the date this Circular takes effect, interest calculation and accounting for income and payment in deposit-taking and lending activities between the State Bank of Vietnam and credit organizations, other entities shall be implemented in accordance with the provisions of this Circular.

3. The Director of the Office, the Head of the Department of Finance-Accounting, the Heads of related units under the State Bank, the Governors of the State Bank branches in provinces and centrally-administered cities, the Chairmen of the Management Boards, the Chairmen of the Members' Councils, and the General Directors (Directors) of credit organizations are responsible for organizing the implementation of this Circular.