Circular No. 02/2010/TT-NHNN dated January 22, 2010 of the State Bank of Vietnam providing in details for the implementation of giving interest rate support to bank loans in 2010 for procurement of machine, equipment, materials to serve agricultural production and materials for building dwelling houses in rural areas

THE STATE BANK OF VIETNAM

Circular No. 02/2010/TT-NHNN of January 22, 2010, detailing the provision of bank loan interest rate supports in 2010 for procurement of agricultural machinery, equipment and supplies and house building materials in rural areas

Pursuant to the National Assembly’s Resolution No. 43/2009/NQ-QH12 of November 27, 2009, on questions and answers at the sixth session of the XIIth National Assembly;

Pursuant to the Government’s Resolution No. 54/NQ-CP of November 11, 2009, on the Government’s October 2009 regular meeting;

Pursuant to the Prime Minister’s Decision No. 497/QD-TTg of April 17, 2009, on the provision of loan interest rate supports for procurement of agricultural machinery, equipment and supplies and house building materials in rural areas;

Pursuant to the Prime Minister’s Decision No. 2213/QD-TTg of December 31, 2009, amending and supplementing a number of articles of the Prime Minister’s Decision No. 497/QD-TTg of April 17, 2009, on the provision of loan interest rate supports for procurement of agricultural machinery, equipment and supplies and house building materials in rural areas;

After reaching agreement with the Ministry of Finance, the State Bank of Vietnam details the provision of interest rate supports for bank loan borrowers in 2010 for procurement of agricultural machinery, equipment and supplies and house building materials in rural areas (below referred to as interest rate supports) as follows:

Article 1. Subjects and scope of application

1. Credit institutions providing interest rate supports include:

a/ State-run commercial banks, joint-stock commercial banks, joint-venture banks, foreign bank branches operating in Vietnam, wholly foreign-owned banks, and the Central People’s Credit Fund (below collectively referred to as commercial banks).

b/ Financial companies (except specialized financial companies engaged in consumer credit and card operations under law) that strictly comply with the State Bank of Vietnam’s regulations on safety ratios in operations of credit institutions, setting up and use of provisions for handling credit risks in banking operations, and have a ratio of non-performing debts to the total outstanding loans of below 5%.

2. Borrowers eligible for interest rate supports include:

a/ Households, farm owners, individuals, cooperative groups, cooperatives and enterprises that take out Vietnam dong short- or medium-term loans for procuring agricultural  machinery, equipment and supplies;

b/ Households and individuals that take out Vietnam dong short- or medium-term loans for purchasing house building materials in communes, excluding those in wards and townships.

3. Interest rate support-eligible loans include Vietnam dong short- or medium-term loans under credit contracts signed and disbursed between January 1, 2010, and December 31, 2010, for procurement of domestic goods, including:

a/ Mechanical machines and equipment for agricultural production and processing;

b/ Light trucks of under 5 tons;

c/ Desktop computers;

d/ Supplies for agricultural production:

- Chemical fertilizers of all kinds: urea fertilizer, baked phosphate and super-phosphate, NPK fertilizers of a nutritious content (N, P2O5, K2O) of 18% or more, and DAP fertilizer;

- Plant protection drugs of all kinds on the list of plant protection drugs permitted for used in Vietnam promulgated together with Circular No. 09/2009/TT-BNN of March 3, 2009, of the Ministry of Agriculture and Rural Development.

e/ Main house-building materials, such as cement, construction steel, and bricks, tiles and roofing materials of all kinds.

Article 2. Interest rate support provision principles, conditions, time limit and method, loan amounts, interest rate support amounts, and dossiers of request for interest rate support-eligible loans

1. Principles of interest rate support provision: Commercial banks and financial companies shall provide Vietnam dong short- or medium-term loans under the ordinary lending mechanism, for procurement of agricultural machinery, equipment and supplies and house building materials in rural areas on the basis of balancing their business capital sources; and provide interest rate supports under regulations of the Prime Minister and guidance of the State Bank of Vietnam.

2. Conditions for enjoyment of interest rate supports:

a/ For borrowers:

- Borrowers that take out loans for procuring agricultural machinery, equipment and supplies shall use them directly in agricultural production or for serving agricultural production (not for re-sale).

- Borrowers that take out loans for purchasing house-building materials must have lawful addresses of residence in communes certified by commune People’s Committees.

b/ For goods:

- Being produced or assembled by organizations and individuals (that have production establishments based in Vietnam and are established and operate under Vietnam law);

- Being labeled under the Government’s Decree No. 89/2006/ND-CP of August 30, 2006, on goods labeling.

3. From the date of disbursement of loans in the period between January 1, 2010, and December 31, 2010, the maximum duration for interest rate support enjoyment is:

a/ 24 months, for loans to be used for procurement of agricultural  machinery, equipment and supplies and processing, and desktop computers. Interest rate supports shall be provided between January 1, 2010, and December 31, 2012.

b/ 12 months, for loans to be used for procurement of agricultural supplies and house-building materials of all kinds. Interest rate supports shall be provided between January 1, 2010, and December 31, 2011.

c/ For interest rate support-eligible loans which are overdue or eligible for repayment rescheduling or of which the actual borrowing term is longer than the interest rate support-eligible duration specified at Points a and b of this Clause, interest rate supports will not be provided for the overdue duration, repayment rescheduling duration or duration exceeding the interest rate support-eligible duration.

4. Maximum loans:

a/ For agricultural  machinery, equipment and supplies and processing and supplies for agricultural production, the maximum loan will equal 100% of the value of goods. Commercial banks and financial companies shall consider and decide on specific levels of loans under the ordinary lending mechanism.

b/ For desktop computers, the maximum loan will equal 100% of the value of goods but must not exceed VND 5 million/computer. Commercial banks and financial companies shall consider and decide on specific levels of loans under the ordinary lending mechanism.

c/ For house building materials of all kinds, the maximum loan will equal 100% of the value of goods but must not exceed VND 50 million. Commercial banks and financial companies shall consider and decide on specific levels of loans under the ordinary lending mechanism.

5. Support-eligible interest rates:

a/ To provide a support equal to 100% of interest calculated on the loan amount and actual borrowing duration, for loans to be used for the procurement of goods specified at Points a, b and c, Clause 3, Article 1 of this Circular.

b/ To provide a support equal to 2%/year of the interest calculated on the loan amount and actual borrowing duration, for loans to be used for the procurement of goods specified at Points d and e, Clause 3, Article 1 of this Circular.

6. For interest rate support-entitled borrowers that have a balance on their deposit accounts and valuable papers in Vietnam dong or foreign currency (collectively referred to as deposit account balance); or whose loans are pledged or guaranteed with valuable papers, savings certificates or other monetary forms in Vietnam dong or a foreign currency (collectively referred to as valuable papers), interest rate supports shall be provided as follows:

a/ For borrowers that have a balance on their deposit accounts at lending commercial banks, financial companies or other credit institutions, these commercial banks or financial companies shall, when signing credit contracts, account the whole deposit account balance as borrowers’ own capital and exclude (-) such balance from the loans to be provided. Borrowers shall report to commercial banks or financial companies on their deposit account balance and value of valuable papers in Vietnam dong or a foreign currency deposited at other credit institutions and take responsibility for the lawfulness and accuracy of such reports. The balance on a borrower’s deposit accounts in Vietnam dong or foreign currency includes demand and time deposits; time, demand and other savings deposits, and excludes the deposit account balance of special-use capital, collateral and blocked deposits under law.

b/ For loans pledged with valuable papers, commercial banks or financial companies shall, when signing credit contracts, account the whole value of valuable papers as borrowers’ own capital and exclude (-) such value from the loans to be provided.

c/ For loans guaranteed with valuable papers, commercial banks or financial companies shall provide interest rate supports for the difference between the outstanding debt and the value of borrowers’ guaranteed valuable papers at the time of signing credit contracts.

d/ Deposit account balance and valuable papers in a foreign currency shall be converted into Vietnam dong at the foreign-currency buying rate applied by commercial banks or financial companies at the time of determining the deposit account balance and value of valuable papers.

7. Method of interest rate support provision: When collecting loan interests, a commercial bank or financial company shall subtract from the borrower’s payable interest an amount equal to the supported loan interest. The State Bank of Vietnam shall transfer the supported interest amount on the basis of the bank’s or company’s report on the supported interest amount.

8. Dossiers of request for borrowing interest rate support-eligible loans:

a/ A written request for borrowing the loan; for a borrower that takes out a loan for purchasing house-building materials,  the commune People’s Committee’s certification of the borrower’s lawful residence in that commune is required.

b/ A plan on the use of machinery, mechanical equipment and supplies for production; or on the use of house building materials.

c/ Documents (goods purchase and sale contracts or invoices) evidencing that the loan is used for goods purchase: Borrowers shall take responsibility before law for the accuracy and legality of these documents. Commercial banks and financial companies shall, based on these documents, check the feasibility and lawfulness of borrowers’ loan use.

d/ The credit contract.

e/ Other documents under the ordinary lending mechanism.

Article 3. Process of interest rate support provision, responsibilities of borrowers and commercial banks and financial companies providing interest rate supports

1. For borrowers of interest rate support-eligible loans:

a/ Between January 1, 2010, and December 31, 2010, when taking out the first loan from a commercial bank or financial company, to send a written request for interest rate support to this bank or company, made according to a set form.

b/ To provide adequate and truthful information and documents for evidencing the use purposes of interest rate support-eligible loans and take responsibility for the accuracy of the provided information and documents. To use these loans for purposes indicated in credit contracts. If using loans for improper purposes, borrowers are not entitled to interest rate support and shall refund the received interest rate supports to commercial banks or financial companies and be handled under law.

c/ To abide by commercial banks’ and financial companies’ regulations on loan provision and interest rate support procedures and reporting regime.

d/ To account loan interests according to those payable to commercial banks or financial companies after reducing the received interest rate supports under law.

e/ To request commercial banks or financial companies to provide interest rate supports under regulations of the Prime Minister and guidance of the State Bank of Vietnam.

2. For commercial banks and financial companies:

a/ To provide interest rate supports for borrowers under regulations of the Prime Minister and guidance of the State Bank of Vietnam; not to refuse to provide interest rate supports if loans are eligible for interest rate supports under regulations; and periodically report on the provision of interest rate supports to the State Bank of Vietnam for inspection and control.

b/ Based on use purposes of interest rate support-eligible loans, to write interest rate support contents in credit contracts under law; to refuse unlawful interest rate support requests.

c/ Chairmen of boards of directors and directors general (directors) of commercial banks and financial companies shall take responsibility and be handled under law for illegal provision of interest rate supports. Violations of commercial banks and financial companies shall be taken into account in their annual ranking, permission for their charter capital increase, or licensing of the establishment of their operation networks.

d/ To apply the ordinary lending mechanism and interest rates to interest rate support-eligible loans in accordance with the Regulation on provision of loans by credit institutions to their clients promulgated together with the State Bank Governor’s Decision No. 1627/2001/QD-NHN of December 31, 2001, and relevant legal documents.

e/ To conduct examination before, during and after providing loans and coordinate with one another in examining and appraising the loan provision in order to ensure the lawful provision of interest rate supports. If detecting borrowers’ improper use of loans, to recover the supported interest amount; if unable to recover it, to report such to competent state agencies for handling or take action against the borrowers’ breach of credit contracts.

f/ To provide borrowers with guidance to ensure convenient, safe and proper provision of loans.

g/ When collecting loan interests from borrowers, to deduct the supported interest amounts from borrowers’ payable loan interests under law. For medium-term loans which, by December 31, 2012, are not due for interest collection, to calculate borrowers’ payable loan interests and deduct the supported interest amounts. To calculate and collect loan interests under law and account and monitor interests on support-eligible loans by:

- Accounting the whole loan interests as incomes under current financial regulations; to account the interest rate support amounts transferred by the State Bank of Vietnam into a separate account under the State Bank’s guidance on accounting interest rate support amounts in 2010.

- Making detailed statements of (or databases on) interest rate support-eligible loans (borrowers, loan amounts, loan term and interest rate, interest rate support amounts, etc.) and sending them to borrowers, and using them for monitoring, making statistics, internal audit, reporting to the State Bank of Vietnam, and examination and supervision by competent state agencies.

h/ To issue interest rate support papers, certified by borrowers and lending commercial banks or financial companies (with signatures and seals) for use as documents for examination and supervision. Such a paper shall be made in 2 copies, one to be filed in the credit dossier and the other sent to the borrower. It shall be made upon collecting loan interests and deducting supported interest amounts or shall be made on a monthly basis coinciding with the time limit for submission of interest rate support reports to the State Bank of Vietnam. For borrowing farmer households, such paper shall be made in the last month of each quarter in the interest rate support duration.

i/ To send interest rate support plan-registrations and reports to the State Bank of Vietnam, made according to set forms, specifically:

- To send quarterly interest-support plan registrations not later than the 10th day of the first month of a quarter; and interest-support plan registrations for the first quarter of 2010 not later than January 30, 2010.

- To send monthly interest-support reports not later the 10th day of the month following the reporting month, ensuring their accuracy.

j/ To monitor and make timely and accurate statistics on interest rate support-eligible loans for the purposes of internal audit, reporting to the State Bank of Vietnam, and examination and supervision by competent state agencies; to open accounts or apply an appropriate management system for separate accounting of and making statistics on interest rate support-eligible loans.

k/ To keep dossiers of interest rate support-eligible loans under law.

Article 4. Responsibilities of the State Bank of Vietnam

1. Monthly, to transfer up to 90% of supported interest amounts reported by commercial banks and financial companies, and annually, transfer the remaining amounts after receiving interest-support finalization reports from commercial banks and financial companies.

2. To assume the prime responsibility for, and coordinate with the Ministry of Finance, the Ministry of Industry and Trade and the Ministry of Agriculture and Rural Development in, examining and supervising the implementation of regulations on interest rate supports when necessary.

3. Responsibilities of the State Bank of Vietnam’s units assisting the State Bank Governor in performing jobs related to the implementation of the interest rate support mechanism:

a/ The Monetary Policy Department shall coordinate with the State Bank of Vietnam’s units in handling matters related to the interest rate support mechanism; receive interest-support plan registrations and interest-support reports from commercial banks and financial companies; notify interest rate support amounts to concerned units under the State Bank of Vietnam for transfer to commercial banks and financial companies; guide the finalization of interest rate support amounts; make and submit reports to the Prime Minister.

b/ The Finance-Accounting Department shall deal with accounting matters related to the interest rate support mechanism (original documents used for accounting, transfer of interest rate support amounts, etc.).

c/ The Transaction Bureau shall account and transfer interest rate support amounts to commercial banks or financial companies as notified by the Monetary Policy Department and decided by the State Bank Governor.

d/ The Banking Inspection and Supervision Agency shall inspect, supervise and handle commercial banks, financial companies and borrowers that violate regulations on interest rate supports.

e/ The State Bank’s provincial-level branches shall examine, supervise and inspect according to their competence the implementation of regulations on interest rate supports and report and propose arising problems to the State Bank Governor and chairpersons of provincial-level People’s Committees for handling.

Article 5. Organization of implementation

1. This Circular takes effect on the date of its signing.

2. The Chief of the Office, the director of the Monetary Policy Department and heads of units under the State Bank, directors of the State Bank’s provincial-level branches, chairmen of boards of directors and directors general (directors) of commercial banks and financial companies, and borrowers shall implement this Circular.-

For the State Bank Governor
Deputy Governor
NGUYEN DONG TIEN