New Circular Amends Lending Regulations in Vietnam

We discuss lending regulations in Vietnam and new amendments, which are set to apply from September 1. This is per changes made to Circular 39/2016/TT-NHNN with regard to lending money for both domestic and international firms.

Lending regulations in Vietnam

Circular 39/2016/TT-NHNN, henceforth referred to as Circular 6, which covers regulations pertaining to lending money for both domestic and international firms, has been amended by Circular 06/2023/TT-NHNN. These changes will come into force September 1.

In this article, the Vietnam Briefing covers the key changes foreign firms should be aware of with respect to lending money in Vietnam.

Article 8: Rejected loans

Note: On August 24, 2023 amendments to article 8 outlined below were suspended and will not come into force on September 1 as originally reported.

Article 8 of the original circular has been amended to list the following reasons to reject a loan application:

• Loans for doing business or investing in sectors or activities prohibited by the Investment Law.
• Loans for buying gold bullion.
• Loans for repaying loan debts owed to credit institutions, except those used for paying loan interest arising during the construction process if they are accounted for in the total construction cost estimate.
• Loans used for repaying foreign loan debts (excluding foreign loans granted in the form of deferred payments for purchased goods) or repaying loan debts owed to other credit institutions, except for a loan used for making early repayment of an existing loan that meets the following conditions:
  • The term of the new loan does not exceed the remaining term of the old one; and
  • The old loan has not yet had any debt rescheduling.
• Loans for capital contributions or for buying or receiving a transfer of a stake of a limited liability company or a partnership, or for shares of a joint-stock company that is not yet listed on the securities market or registered for trading on Upcom.
• Loans for making capital contributions to investment projects that are unfit for sale or for business operations.
• Loans for financial offset purposes, except for those meeting the following conditions:
  • The customer has used their own funds to pay costs incurred by their business project for a period of less than 12 months when a decision on a loan application is listed; and
  • Costs paid using the customer’s funds for executing a business project are to be covered using the fund borrowed from the credit institution per the loan application.

Article 11: Currency for repayment

Article 11 has been amended to remove a stipulation that debt must be repaid in the currency in which the loan is issued. The currency used to repay a loan is now at the discretion of the credit institution and the borrower.

Article 13: Interest rates

Article 13 now stipulates that if a customer has been rated transparent and healthy by a credit institution, the credit institution and the customer can agree on the interest rate of a short-term loan in Vietnamese dong. This cannot, however, exceed the maximum lending interest rate set by the governor of the SBV and is for the purposes of:

• Supporting the agricultural and rural development sectors;
• Implementing an export business plan;
• Financing business activities of small and medium-sized enterprises;
• Developing ancillary industries; and
• Financing the business operations of high-tech enterprises.

Article 18: Loan repayments

Article 18 now clearly stipulates the order in which overdue repayments need to be collected. Specifically, it now states that creditors need to collect overdue principal amounts first, then unpaid interest on the overdue principal amount, then the principal amount due, and finally the interest on the principal amount.

Section 3: Digital lending

An additional section has also been added to the law governing digital lending. It adds the following regulations:

• Credit institutions engaged in digital lending need to ensure the security, safety, and protection of their communications and the confidentiality of information provided by clients.
• Digital lending technology must be tier-3 or higher with regard to digital security requirements. Security levels and their requirements are laid out in Decree No. 85/2016/ND-CP.
• Credit institutions engaged in digital lending must also:
  • Ensure accuracy, confidentiality, and safety during the collection, use, and verification of information and data;
  • Adopt measures for examining, checking, updating, and verifying information and data; and measures to prevent forgery or the falsification of information or data;
  • Develop measures for monitoring, identifying, measuring, and controlling risks; and
  • Assign responsibilities to staff members regarding the performance of digital lending activities and risk management and control.

Who is in charge of implementing this circular?

There are several parties involved in the implementation of this circular. These include:

• The Chief of Office;
• The Director of the Monetary Policy Department;
• Department heads at the SBV; and
• Credit institutions.

When does it take effect?

This circular comes into force from September 01, 2023, but applies only to loans made on or after this date.

Loan agreements or credit contracts signed before September 1, 2023, will continue to be governed by the terms and conditions of the signed loan agreement or credit contract and in line with the regulations and laws in force when it was signed.

Note that any revisions to a loan agreement or credit contract predating Circular 6 must comply with the provisions of this new circular.

Also read

• Vietnam’s Banking Sector: Opportunities and Risks for Foreign Investors
• Vietnam’s Insurance Industry M&As: Opportunities and Challenges
• SBV Issues Guidance on Anti-Money Laundering Law

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