Circular No. 05/2009/TT-NHNN dated April 7, 2009, of the State Bank stipulating in detail the provision of interest rate supports for organizations and individuals borrowing medium- and long-term bank loans for fresh investment in production and business development

THE STATE BANK OF VIETNAM

Circular No. 05/2009/TT-NHNN of April 7, 2009, stipulating in detail the provision of interest rate supports for organizations and individuals borrowing medium- and long-term bank loans for fresh investment in production and business development

Pursuant to Government’s Resolution No. 30/2008/NQ-CP of December 11, 2008, on some urgent measures to curb economic decline, maintain economic growth and ensure social welfare;

Pursuant to the Prime Minister’s Decision No. 443/QD-TTg of April 4, 2009, on provision of interest rate supports for organizations and individuals borrowing medium- and long-term bank loans for investment in production and business development;

The State Bank of Vietnam stipulates in detail the provision of interest rate supports for organizations and individuals borrowing medium- and long-term bank loans for investment in production and business development (below referred to as interest rate supports) as follows:

Article 1. Purposes of interest rate supports

The State shall provide interest rate supports for Vietnam-dong medium- and long-term bank loans borrowed by organizations and individuals for investment in production and business or infrastructure development to reduce investment costs, increase fixed assets, improve production and business capacity and product competitiveness and create jobs.

Article 2. Subjects and scope of application of regulations on interest rate supports

1. Credit institutions providing interest rate supports for Vietnam-dong medium- and long-term loans borrowed by organizations and individuals for investment (investment projects under which construction or procurement activities are carried out before or after April 1, 2009, with the construction or procurement duration conformable with the grace period committed in credit contracts), include:

a/ Commercial banks specified in Clause 1, Article 2, of the Prime Minister’s Decision No. 131/QD-TTg of January 23, 2009, on provision of interest rate supports to organizations and individuals borrowing bank loans for production and business activities.

b/ Financial companies specified in Clause 1, Article 1, of the Prime Minister’s Decision No. 333/QD-TTg of March 10, 2009, amending and supplementing a number of articles of Decision No. 131/QD-TTg.

c/ The Vietnam Development Bank, which shall provide interest rate supports to entities eligible for preferential loans.

2. Borrowers eligible for interest rate supports include:

a/ Organizations and individuals borrowing loans from commercial banks or financial companies for implementation of new investment projects on production and business or infrastructure development at home under Article 1 of the State Bank Governor’s Decision No. 127/2005/QD-NHNN of February 3, 2005, amending and supplementing a number of articles of the Regulation on provision of loans by credit institutions to borrowers, issued together with Decision No. 1627/2001/QD-NHNN of December 31, 2001.

b/ Investors borrowing loans from the Vietnam Development Bank for implementation of new investment projects on production and business or infrastructure development at home under Point a, Clause 2, Article 1, and Article 6 of the Government’s Decree No. 151/2006/ND-CP of December 20, 2006, on the State’s investment credit and export credit.

3. Loans eligible for interest rate supports include Vietnam-dong medium- and long-term loans borrowed for the implementation of new investment projects on production and business or infrastructure development in various economic branches and sectors under credit contracts signed before or after April 1, 2009, and disbursed (once or several times) between April 1 and December 31, 2009:

a/ Loans provided by commercial banks and financial companies and classified according to reporting and statistics regulations applicable to units under the State Bank of Vietnam and credit institutions, issued together with the State Bank Governor’s Decision No. 477/2004/QD-NHNN of April 28, 2004, and Decision No. 143/TCTK/PPCD of December 22, 1993, of the General Director of the General Statistics Office of Vietnam, promulgating the system of economic sectors of grades II, III and IV and the list of national economic sectors, including:

- Agriculture and forestry;

- Fisheries;

- Mining industry;

- Processing industry;

- Electricity, gas and water production and distribution;

- Construction industry (except for construction of office buildings for lease and construction and repair of houses for sale);

- Trading in and repair of motor vehicles, mopeds, motorcycles, personal articles and household appliances;

- Transportation, warehousing and communication;

- Scientific and technological activities.

b/ Investment loans provided by the Vietnam Development Bank to projects on the list of those eligible for investment credit issued together with the Government’s Decree No. 106/2008/ND-CP of September 19, 2008, amending and supplementing a number of articles of Decree No. 151/2006/ND-CP of December 20, 2006, on the State’s investment credit and export credit.

Article 3. Principles on provision of interest rate supports, loan duration, interest rate support levels and method of providing interest rate supports

1. Interest rate supports shall be provided on the principle that commercial banks, financial companies and the Vietnam Development Bank shall provide medium- and long-term loans for investment in production and business or infrastructure development under ordinary lending mechanisms and provide interest rate supports in strict accordance with the Prime Minister’s regulations and the State Bank of Vietnam’s guidance.

2. The maximum duration of loans eligible for interest rate supports is 24 months, counting from the date of loan disbursement under credit contracts signed before or after April 1, 2009, but actually disbursed between April 1 and December 31, 2009. Interest rate supports shall be provided from April 1, 2009, to December 31, 2011. In case loans eligible for interest rate supports become overdue or are extended for a duration exceeding 24 months, interest rate supports must not be provided for the overdue period or extension duration exceeding 24 months.

3. The interest rate support level for borrowers is 4%/year, calculated on the actual loan amount and duration between April 1, 2009 and December 31, 2011.

4. Interest rate supports shall be provided by the method that when collecting loan interests, commercial banks, financial companies and the Vietnam Development Bank shall subtract interest rate support amounts from payable loan interest amounts for borrowers. The State Bank of Vietnam shall transfer the provided loan interest rate support amounts on the basis of the interest rate support amounts reported by commercial banks, financial companies and the Vietnam Development Bank.

Article 4. Procedures and responsibilities of borrowers, commercial banks, financial companies and the Vietnam Development Banks for provision of interest rate supports

1. Borrowers of loans eligible for interest rate supports shall:

a/ Send a written request for interest rate support, made according to form No. 01 in the Appendix to this Circular (not printed herein), to the lending commercial bank, financial company or the Vietnam Development Bank for the first loan borrowed from the commercial bank, financial company or the Vietnam Development in the period from April 1 to December 31, 2009, including loans borrowed between April 1, 2009, and the effective date of this Circular.

b/ Use loans eligible for interest rate supports for proper purposes as stated in the credit contracts. If using loans for improper purposes, they will not be provided with interest rate supports and shall repay the provided interest rate support amounts to the commercial bank, financial company or the Vietnam Development Bank and be handled in accordance with law.

c/ Comply with regulations of the commercial bank, financial company, or the Vietnam Development Bank on procedures for loan and interest rate support provision and reporting regulations.

d/ Account paid loan interests in strict accordance with the interest amounts payable to the commercial bank, financial company or the Vietnam Development Bank after being provided with interest rate supports in accordance with law.

e/ Request the lending commercial bank, financial company or the Vietnam Development Bank to provide interest rate supports in strict accordance with the Prime Minister’s regulations and the State Bank of Vietnam’s guidance.

2. Commercial banks, financial companies and the Vietnam Development Bank shall:

a/ Provide interest rate supports to borrowers in strict accordance with the Prime Minister’s regulations and the State Bank of Vietnam’s guidance; refrain from refusing to provide interest rate supports for eligible loans; make periodical reports to the State Bank of Vietnam for examination and supervision of the provision of interest rate supports.

b/ Base themselves on the use purposes of eligible loans to fill in credit contracts information on the provision of interest rate supports in accordance with law; and reject requests for provision of interest rate support in contravention of law.

c/ Chairmen of the Boards of Directors and directors general (directors) of commercial banks and financial companies and the Chairman of the Management Council and the Director General of the Vietnam Development Bank shall take responsibility for and be handled in accordance with law for cases of providing interest rate supports in contravention of law. Violations of commercial banks and financial companies shall be taken into consideration upon annual ranking, approval of increase of charter capital and grant of licenses for opening of their networks.

d/ Apply mechanisms on loan provision and loan interests as follows:

- Commercial banks and financial companies shall apply the ordinary lending mechanisms and offer ordinary interest rates to loans eligible for interest rate supports in accordance with the Regulation on provision of loans by credit institutions to customers issued together with Decision No. 1627/2001/QD-NHNN and other relevant legal documents.

- The Vietnam Development Bank shall apply the preferential lending mechanism and offer preferential loan interests as prescribed in Decree No. 151/2006/ND-CP, Decree No. 106/2008/ND-CP and other relevant legal documents.

e/ Conduct examination before, during and after loan provision in order to ensure that interest rate supports are provided in strict accordance with law. If detecting that borrowers use loans for purposes ineligible for interest rate supports, recover loan interest support amounts already provided; in case it is impossible to recover these amounts, report the cases to competent state agencies for handling or filing a lawsuit against borrowers’ breach of credit contracts.

f/ Provide guidance to ensure convenient and safe provision of loans to eligible borrowers.

g/ When collecting loan interests from customers, commercial banks, financial companies and the Vietnam Development Bank shall subtract the interest rate support amounts from the payable loan interest amounts in accordance with law. By December 31, 2011, if loan interests are not due yet, commercial banks, financial companies and the Vietnam Development Bank shall calculate loan interest amounts payable by borrowers and subtract the interest rate support amounts from these loan interest amounts. Loan interests shall be calculated and collected in accordance with law. Loan interests eligible for interest rate supports shall be accounted and supervised as follows:

- To account the whole amount of loan interests as incomes in accordance  with current financial regulations; the interest rate support amounts transferred from the State Bank of Vietnam shall be accounted in a separate account (account “receivable” - sub-account: receivable from the State Bank of Vietnam for provision of interest rate supports during 2009-2011).

- To make statements (or a database) for monitoring loans eligible interest rate supports (borrowers, loan amounts, duration and interest rates, interest rate support amounts) which shall be sent to borrowers to serve the supervision, statistical work and internal audit, reporting to the State Bank of Vietnam, and examination and supervision by competent state agencies.

h/ Make a written certification of interest rate supports with the certification of the borrower and lending bank or financial company (with signature and seal), serving as a voucher for examination and supervision. A written certification of interest rate supports shall be made in 02 copies, one to be filed in the credit dossier and the other to be sent to the borrower. It shall be either made upon collection of loan interest and subtraction of interest rate support amount or on a monthly basis when sending reports on provision of interest rate supports to the State Bank of Vietnam. For loan borrowers being peasant households, written certifications of interest rate supports shall be made in the last month of each quarter during the period of interest rate support provision.

i/ Send written registrations of the plan on provision of interest rate supports and report on the provided amount of interest rate supports to the State Bank of Vietnam:

- The written registration of the plan on provision of interest rate supports shall be made according to forms No. 02 and 03 provided in the Appendix to this Circular (not printed herein) and sent to the State Bank of Vietnam no later than the 10th of the first month of the subsequent quarter; the written registration of the plan on provision of interest rate supports in the second quarter of 2009 shall be sent no later than April 15, 2009.

- Monthly reports on the provision of interest rate supports shall be accurately made according to forms No. 04, 05 and 06 provided in the Appendix to this Circular (not printed herein) and sent to the State Bank of Vietnam no later than the 10th of subsequent month.

j/ Promptly and accurately monitor and make statistics of loans eligible for interest rate supports in service of internal audit, reporting to the State Bank of Vietnam and examination and supervision by competent state agencies; open accounts or apply appropriate management systems to make separate accounting and statistics of loans eligible for interest rate support.

k/ Keep dossiers of loans eligible for interest rate supports in accordance with law.

Article 5. Responsibilities of the State Bank of Vietnam

1. Monthly, to transfer up to 90% of the provided amount of interest rate supports as reported by commercial banks, financial companies and the Vietnam Development Bank. To transfer the remainder of interest rate supports provided in the year after receiving finalization reports on the provision of interest rate supports from commercial banks, financial companies and the Vietnam Development Bank.

2. To assume the prime responsibility for, and coordinate with the Ministry of Finance and relevant ministries and branches in, examining and supervising the observance of the law on provision of interest rate supports when necessary.

3. Responsibilities of units under the State Bank of Vietnam in assisting the State Bank Governor in performing tasks of providing interest rate supports:

a/ The Monetary Policy Department shall coordinate with units under the State Bank of Vietnam in dealing with matters concerning the mechanism on provision of interest rate supports; receive the written registrations of plans and reports on provision of interest rate supports from commercial banks, financial companies and the Vietnam Development Bank; notify the transfer of the interest rate support amounts to commercial banks, financial companies and the Vietnam Development Bank; guide the finalization of the interest rate support amounts; and make reports to the Prime Minister.

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

c/ Transaction offices shall effect the accounting and transfer of interest rate support amounts to commercial banks, financial companies and the Vietnam Development Bank.

d/ The banking examination and supervision agency (the State Bank Inspectorate) shall examine, supervise and handle commercial banks, financial companies and the Vietnam Development Bank and borrowers that violate legal regulations on provision of interest rate supports.

e/ Provincial-level branches of the State Bank of Vietnam shall examine, supervise and inspect  the observance of the law on provision of interest rate supports according to their competence and report and propose the settlement of arising problems to the State Bank Governor and the presidents of provincial-level People’s Committees.

Article 6. Organization of implementation

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

2. The director of the Office, the director of the Monetary Policy Department and heads of units under the State Bank, directors of provincial-level branches of the State Bank of Vietnam, chairmen of boards of directors and directors general (directors) of commercial banks and financial companies, the Chairman of the Management Council and the Director General of the Vietnam Development Bank and borrowers shall implement this Circular.

For the Governor of the State Bank of Vietnam
Deputy Governor
NGUYEN DONG TIEN