Circular 01/2020/TT-NHNN debt rescheduling exemption or reduction of interest and fees

CIRCULAR

On credit institutions and foreign bank branches carrying out debt rescheduling, giving exemption from or reduction of loan interests and charges, and maintaining classified loan groups in order to help their clients affected by the Covid-19 pandemic^[1]

Pursuant to the June 16, 2010 Law on the State Bank of Vietnam;

Pursuant to the June 16, 2010 Law on Credit Institutions; and the November 20, 2017 Law Amending and Supplementing a Number of Articles of the Law on Credit Institutions;

Pursuant to the Government’s Decree No. 16/2017/ND-CP of February 17, 2017, defining the functions, tasks, powers and organizational structure of the State Bank of Vietnam;

After reaching agreement with the Ministry of Finance;

At the proposal of the Chief of the Banking Supervision Agency;

The Governor of the State Bank of Vietnam promulgates the Circular on credit institutions and foreign bank branches carrying out debt rescheduling, giving exemption from or reduction of loan interests and charges, and maintaining classified loan groups in order to help their clients affected by the acute respiratory infections caused by a new strain of coronavirus (Covid-19).

Chapter I

GENERAL PROVISIONS

Article 1.Scope of regulation

This Circular regulates credit institutions and foreign bank branches carrying out debt rescheduling, giving exemption from or reduction of loan interests and charges, and maintaining classified loan groups in order to help their clients affected by the Covid-19 pandemic.

Article 2.Subjects of application

1. Credit institutions (except policy banks) and foreign bank branches.

2. Clients of credit institutions and foreign bank branches (except clients being credit institutions and foreign bank branches).

3. Other organizations and individuals involved in debt rescheduling, exemption from or reduction of loan interests and charges, and maintenance of classified loan groups for helping clients affected by the COVID-19 pandemic.

Article 3.Application of relevant legal documents

Debt rescheduling, exemption from or reduction of loan interests and charges, and maintenance of classified loan groups for helping clients affected by the COVID-19 pandemic must comply with this Circular. Other contents concerning debt rescheduling, exemption from or reduction of loan interests and charges, and loan classification not provided in this Circular must comply with other relevant legal documents.

Chapter II

SPECIFIC PROVISIONS

Article 4.Debt rescheduling

1. Debts eligible for rescheduling are loan principals and/or interests (including debit balance of debts regulated by the Government’s Decree No. 55/2015/ND-CP of June 9, 2015, on credit policies to serve agricultural and rural development (revised) that fully meet the following conditions:

a/ Arising from lending and financial leasing activities;

b/ Giving rise to obligations to repay loan principals and/or interests from January 23, 2020, to the day following the period of 3 months from the date the Covid-19 pandemic is declared over by the Prime Minister;

c/ Being of clients that are unable to make due payment of their loan principals and/or interests under signed lending or financial leasing contracts or agreements due to loss of their revenues or incomes as a consequence of the Covid-19 pandemic.

2. The debt rescheduling for a debit balance specified in Clause 1 of this Article shall be carried out in the following cases:

a/ Such debit balance is not due or falls overdue for up to 10 (ten) days from the due date under the signed lending or financial leasing contract or agreement;

b/ Such debit balance is overdue (except the case specified at Point a of this Clause) from January 23, 2020, to the day following the period of 15 (fifteen) days from the effective date of this Circular.

3. Credit institutions and foreign bank branches shall decide on the rescheduling of debit balances specified in Clauses 1 and 2 of this Article upon request of clients and their own evaluation of capability of clients to pay off loan principals and/or interests after the debt rescheduling and depending on the severity of impacts of the Covid-19 pandemic, and must satisfy the following requirements:

a/ They refuse to reschedule debts in violation of law.

b/ In case of extension of a debt repayment deadline,  the rescheduled period must not exceed 12 months from the last day of the lending or financial leasing term (the time when the client is required to fully repay the loan principal and interest under the signed lending or financial leasing contract or agreement).

Article 5.Exemption from or reduction of loan interests and charges

Credit institutions and foreign bank branches shall decide on exemption from or reduction of loan interests and charges in accordance with their internal regulations for debit balances arising from the credit extension (except purchase of, and investment in, corporate bonds) for which due dates for repayment of loan principals and/or interests fall between January 23, 2020, and the day following the period of 3 months from the date when the Covid-19 pandemic is declared over by the Prime Minister, while their clients are unable to make due payments of loan principals and/or interests under signed lending or financial leasing contracts or agreements due to loss of their revenues and incomes as a consequence of the Covid-19 pandemic.

Article 6.Maintenance of classified loan groups

1. Credit institutions and foreign bank branches may maintain classified loan groups in accordance with the State Bank of Vietnam’s regulations applied at the latest time before January 23, 2020, for:

a/ Debit balances eligible for rescheduling specified in Article 4 of this Circular;

b/ Debit balances eligible for exemption from or reduction of loan interests specified in Article 5 of this Circular;

c/ Debit balances specified at Points a and b of this Clause, including those eligible for rescheduling, exemption from or reduction of loan interests and adjustment of loan groups under the State Bank of Vietnam’s regulations, between January 23, 2020, and the day following the period of 15 (fifteen) days from the effective date of this Circular.

2. For the debit balances specified in Clause 1 of this Article, credit institutions and foreign bank branches shall classify loans and set aside risk provisions according to rescheduled terms in accordance with the law on classification of loans, setting aside and use of provisions for handling risks in operations of credit institutions and foreign bank branches but are not required to apply adjustment principles to groups of loans with higher risks.

3. Regarding receivable interests on debit balances eligible for rescheduling, exemption from or reduction of loan interests, and maintenance of current loans (group-1 loans) in accordance with this Circular. From the date of debt rescheduling, credit institutions and foreign bank branches are not required to account incomes (estimated incomes) but shall follow off-balance sheets to urge the debt collection; and record received debts as incomes in accordance with regulations on financial regime applicable to credit institutions and foreign bank branches.

Article 7.Responsibilities of credit institutions and foreign bank branches

1. To decide on, and take responsibility for, debt rescheduling, exemption from or reduction of loan interests and charges, maintenance of classified loan groups under Articles 4, 5 and 6 of this Circular, ensuring strict supervision, safety, and prevention of abuse of debt rescheduling, exemption from or reduction of loan interests and charges, or maintenance of classified loan groups for self-seeking purposes and mis-reflection of credit quality.

2. To issue internal regulations on debt rescheduling, exemption from or reduction of loan interests and charges, and maintenance of classified loan groups in accordance with this Circular for implementation in the entire system, including the following contents:

a/ Criteria for determining debit balances of clients affected by the Covid-19 pandemic;

b/ Order, procedures, decentralization of powers, and assignment of tasks and responsibilities to each person or section for carrying out debt rescheduling, exemption from or reduction of loan interests and charges, and maintenance of classified loan groups, on the principle that the person or section that decides on the debt rescheduling, exemption from or reduction of loan interests and charges, and maintenance of classified loan groups is not the person or section that has approved the credit extension, except where the credit extension has been approved by the Board of Directors, Members’ Council, General Director/Director or parent bank (for foreign bank branches). In case the credit extension and debt rescheduling are approved by a council, the chairperson of the council for approval of debt rescheduling must not be the chairperson of the council for approval of credit extension and at least two-thirds (2/3) of total members of the council for approval of debt rescheduling are not members of the council for approval of credit extension;

c/ Frequency of review and evaluation of capability of clients to repay loans after debt rescheduling, exemption from or reduction of loan interests and charges, and maintenance of classified loan groups in accordance with law; monitoring, inspection, control and supervision of debt rescheduling, exemption from or reduction of loan interests and charges, and debit balances eligible for debt rescheduling, exemption from or reduction of loan interests, and maintenance of classified loan groups.

3. Within the first 10 (ten) days of every month, credit institutions (except people’s credit funds) and foreign bank branches shall send reports on debt rescheduling, exemption from or reduction of loan interests, and maintenance of classified loan groups until the last day of the preceding month in accordance with the Appendix to this Circular to the State Bank of Vietnam (the Credit Department for Economic Sectors).

4. Within the first 10 (ten) days of every month, credit institutions being people’s credit funds shall send reports on debt rescheduling, exemption from or reduction of loan interests, and maintenance of classified loan groups until the last day of the preceding month in accordance to the Appendix to this Circular to the State Bank’s provincial-level branches in localities where their head offices are located.

Article 8.Responsibilities of units of the State Bank of Vietnam

1. Responsibilities of the Credit Department for Economic Sectors

a/ To sum up reports mentioned in Clause 3, Article 7 of this Circular and at Point a, Clause 3 of this Article;

b/ To assume the prime responsibility for, and coordinate with the Monetary Policy Department, Banking Supervision Agency, and the State Bank’s provincial-level branches in, advising the Governor of the State Bank of Vietnam in addressing problems arising in the course of implementation of this Circular.

2. Responsibilities of the Banking Supervision Agency

To inspect and supervise credit institutions and foreign bank branches in the implementation of the Circular within the ambit of its functions and tasks.

3. Responsibilities of the State Bank’s provincial-level branches

a/ Within the first 15 (fifteen) days of every month, to sum up reports of people’s credit funds in their localities under Clause 4, Article 7 of this Circular and send them to the Credit Department for Economic Sectors for summing up;

b/ To inspect and supervise credit institutions and foreign bank branches in the implementation of this Circular within the ambit of their functions and tasks.

4. Responsibilities of the Vietnam National Credit Information Center

The Vietnam National Credit Information Center shall adjust credit information of clients upon request of credit institutions and foreign bank branches in accordance with this Circular.

Chapter III

IMPLEMENTATION PROVISIONS

Article 9.Effect

This Circular takes effect on March 13, 2020.

Article 10.Organization of implementation

The Chief of the Office, Chief of the Banking Supervision Agency, and heads of the units of the State Bank of Vietnam, directors of the State Bank’s provincial-level branches, chairpersons of Boards of Directors or Members’ Councils, and directors general (directors) of credit institutions and foreign bank branches shall organize the implementation of this Circular.-

For the State Bank Governor
Deputy Governor
DOAN THAI SON

* The Appendix to this Circular is not translated.