Circular No. 03/2021/TT-NHNN amending a number of articles of the Circular No. 01/2020/TT-NHNN

CIRCULAR

Amending and supplementing a number of articles of the Circular No. 01/2020/TT-NHNN dated March 13, 2020 of the State Bank Governor of Vietnam 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

___________________

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

Pursuant to the Law on Credit Institutions dated June 16, 2010 and the Law on amending and supplementing a number of Articles of the Law on Credit Institutions dated November 20, 2017;

Pursuant to the Government’s Decree No. 16/2017/ND-CP dated 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 Inspector of the Banking Supervision Agency;

The Governor of the State Bank of Vietnam hereby promulgates the Circular amending and supplementing a number of articles of the Circular No. 01/2020/TT-NHNN dated March 13, 2020 of the State Bank Governor of Vietnam 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 (hereinafter referred to as the Circular No. 01/2020/TT-NHNN).

Article 1. To amend and supplement a number of articles of the Circular No. 01/2020/TT-NHNN

1. To amend and supplement Article 3 as follows:

“Article 3. Application of relevant legal documents

Debt rescheduling, exemption from or reduction of loan interests and charges, and maintenance of classified loan groups and setting aside risk provisions 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, setting aside and use of provisions for risks settlement not provided in this Circular must comply with other relevant legal documents.”

2. To amend and supplement Article 4 as follows:

“Article 4. Debt rescheduling

Credit institutions and foreign bank branches shall reschedule debit balance of debts (including debts regulated by the Government’s Decree No. 55/2015/ND-CP dated June 09, 2015, on credit policies to serve agricultural and rural development (revised)) that fully meet the following conditions:

1. Arising before June 10, 2020, from lending and financial leasing activities.

2. Giving rise to obligations to repay loan principals and/or interests from January 23, 2020 to December 31, 2021.

3. The debt rescheduling for a debit balance of debts 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 contract or agreement, except for the cases specified at Points b and c of this Clause;

b) Debit balance of the debts arising before January 23, 2020 and overdue from January 23, 2020 to March 29, 2020;

c) Debit balance of the debts arising from January 23, 2020 and overdue before May 17, 2021;

4. Being of clients that are unable to make due payment of their loan principals and/or interests under contracts or agreements due to loss of their revenues or incomes as a consequence of the Covid-19 pandemic, as evaluated by credit institutions or foreign bank branches.

5. Clients request for debt rescheduling and such clients are evaluated by credit institutions or foreign bank branches of capability to pay off loan principals and/or interests according to the rescheduled period.

6. Credit institutions and foreign bank branches refuse to reschedule debts in violation of law.

7. The rescheduled period (including debt extension) shall be in line with the consequence of Covid-19 pandemic on clients and must not exceed 12 months from the date on which the credit institutions or foreign bank branches reschedule debts.

8. The debt rescheduling for clients shall be carried out until December 31, 2021.”

3. To amend and supplement Article 5 as follows:

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

1. 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 of the debts arising before June 10, 2020, 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 December 31, 2021, while their clients are unable to make due payments of loan principals and/or interests under signed contracts or agreements due to loss of their revenues and incomes as a consequence of the Covid-19 pandemic.

2. Clients shall be entitled to exemption from or reduction of loan interests and charges in accordance with this Circular until December 31, 2021.”

4. To amend and supplement Article 6 as follows:

“Article 6. Maintenance of classified loan groups and loan classification

1. Credit institutions and foreign bank branches may maintain classified loan groups in accordance with the State Bank of Vietnam’s regulations on loan classification in credit institutions and foreign bank branches’ operation applied at the latest time before January 23, 2020, for debit balances of the debts arising before January 23, 2020 as follows:

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 March 29, 2020.

2. Credit institutions and foreign bank branches may maintain classified loan groups in accordance with the State Bank of Vietnam’s regulations on loan classification in credit institutions and foreign bank branches’ operation for those eligible for rescheduling, exemption from or reduction of loan interests under Article 4 and Article 5 of this Circular, for debts arising from January 23, 2020 to before June 10, 2020 as follows:

a) Maintenance of loan groups classified at the latest time before the date of initial debt rescheduling for debit balances prescribed at Point a, Clause 3, Article 4 of this Circular;

b) Maintenance of loan groups classified at the latest time before the date the debt is transferred to overdue for the debt balance specified at Point c, Clause 3, Article 4 of this Circular;

c) Maintenance of loan groups classified at the latest time before the date of initial exemption from or reduction of loan interests for debit balances prescribed in Article 5 of this Circular.

3. Regarding debit balance having its loan groups maintained under Clauses 1 and 2 of this Article after being rescheduled, and is not due according to rescheduled terms, credit institutions and foreign bank branches are not required to apply the principle of adjustment and reclassification to the loan groups with higher risk levels according to the State Bank of Vietnam’s regulations on loan classification in operations of credit institutions and foreign bank branches.

4. Regarding debit balance having its loan groups maintained under Clauses 1 and 2 of this Article after being rescheduled, and falls overdue according to rescheduled terms without continuing to be rescheduled under this Circular by credit institutions and foreign bank branches, credit institutions and foreign bank branches must classify loans according to the State Bank of Vietnam’s regulations on loan classification in operations of credit institutions and foreign bank branches.

5. 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.

6. From January 01, 2024, credit institutions and foreign bank branches shall, based on the State Bank of Vietnam’s regulations on loan classification in operations of credit institutions and foreign bank branches, classify clients’ debit balances and off-balance sheets, including debit balances eligible for rescheduling, exemption from or reduction of loan interests, and maintenance of current loans according to this Circular.”

5. To add Article 6a after Article 6 as follows:

“Article 6a. Setting aside risk provisions

Credit institutions and foreign bank branches shall set aside specific provisions for clients having debit balances eligible for rescheduling, exemption from or reduction of loan interests in accordance with this Circular as follows:

1. Based on the State Bank of Vietnam's regulations on setting aside risk provisions in operations of credit institutions and foreign bank branches, credit institutions and foreign bank branches shall set aside specific provisions for all clients’ debit balances according to loan classification results prescribed in Article 6 of this Circular, for debit balances eligible for maintenance of current loans, and loan classification results for the remaining debit balances of clients according to the State Bank of Vietnam’s regulations on setting aside risk provisions in operations of credit institutions and foreign bank branches.

2. Credit institutions, foreign bank branches shall determine the specific provision amount to be set aside for all debit balances of clients according to the loan classification results under the State Bank of Vietnam’s regulations on setting aside risk provisions in operations of credit institutions and foreign bank branches (not apply regulations on maintenance of classified loan groups prescribed in Article 6 of this Circular).

3. The specific provision amount to be set aside by credit institutions and foreign bank branches shall be determined according to the following formula:

Specific provision amount to be additionally set aside = A - B

In which:

- A: Specific provision amount to be set aside as prescribed in Clause 2 of this Article.

- B: Specific provision amount that have been set aside as prescribed in Clause 1 of this Article.

4. In case where the specific provision amount to be additionally set aside determined under Clause 3 of this Article is positive, credit institutions and foreign bank branches shall additionally set aside provisions as follows:

a) By December 31, 2021: At least 30% of the specific provision amount must be additionally set aside;

a) By December 31, 2022: At least 60% of the specific provision amount must be additionally set aside;

c) By December 31, 2023: 100% of the specific provision amount shall be additionally set aside.

5. From January 01, 2024, credit institutions and foreign bank branches shall, based on the State Bank of Vietnam’s regulations on setting aside risk provisions in operations of credit institutions and foreign bank branches, set aside risk provisions for all clients’ debit balances and off-balance sheets, including debit balances eligible for rescheduling, exemption from or reduction of loan interests, and maintenance of current loans according to this Circular.”

6. To replace the Appendix attached to the Circular No. 01/2020/TT-NHNN by the Appendix attached to this Circular.

Article 2. Transitional provisions

Regarding contracts and agreements on debt rescheduling signed before the effective date of this Circular, credit institutions and foreign bank branches are allowed to continue performing according to signed agreements on rescheduled period under the Circular No. 01/2020/TT-NHNN. Any amendment and supplementation of such agreements and contracts must comply with law regulations and relevant regulations of this Circular.

Article 3. 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 branches of provinces and centrally-run cities, credit institutions and foreign bank branches shall organize the implementation of this Circular.

Article 4. Implementation provisions

This Circular takes effect on May 17, 2021./.

* All Appendices are not translated herein.