Circular No. 14/2017/TT-NHNN dated September 29, 2017 of the State Bank of Vietnam on methods of calculating interest on depositing and credit extension transaction between credit institutions and customers

THE STATE BANK OF VIETNAM

Circular No. 14/2017/TT-NHNN dated September 29, 2017 of the State Bank of Vietnam on methods of calculating interest on depositing and credit extension transaction between credit institutions and customers

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

Pursuant to the Law on credit institutions dated June 16, 2010;

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

At the request of the Director of Department of Finance and Accounting;

The Governor of the State bank of Vietnam promulgates a Circular on methods of calculating interest on depositing and credit extension transaction between credit institutions and customers.

Article 1. Scope of adjustment

This Circular regulates the methods of calculating interest incurred from depositing and credit extension between credit institutions, branches of foreign banks and customers.

Article 2. Subject of application

1.Credit institutions, branches of foreign banks receiving deposits from customer and approving credit extension to customers (hereinafter referred to as credit institution).

2.Depositors and borrowers at credit institutions (hereinafter referred to as clients).

Article 3. Definitions

1.Interestrefers to a sum that acredit institution must pay a depositor or a sum that a borrower must pay a credit institution for using the received sum.

2.Interest durationrefers to a total length of time agreed upon between the credit institution and the client to determine interest on the deposit or loan in accordance with this Circular.

3.Interest periodrefers to a period of time constituting an interest duration based on which the credit institution and the client agree to determine interest.

Interest period may be expressed by hour, day, week, month and year as agreed between the credit institution and the client in accordance with the law.

Article 4. Interest calculating principles

1.Interest rate is expressed by % per year (annual interest rate), a year means 365 days.

The period of time used to convert interest rate by % per month, % per week, % per hour into interest rate by % per day, convert interest rate by % per day into interest rate by % per year and vice verse is calculated as follows:

a) A year means 365 days;

b) A month means 30 days;

c) A week means 7 days;

d) A day means 24 hours.

2.Regarding deposits or loans with a term of one day or more:

The credit institution may negotiate with the client on the interest duration and the date of determination of the balance for the calculation of interest by employing either of the following 2 methods:

a) The interest duration is determined from the day following the day of disbursement of the loan or the day following the day of receipt of the deposit until the end of the last day of full payment for the deposit and loan (deleting the first day, including the last day of the interest duration) and the time to determine the balance for interest calculation is at the beginning of any day within the interest duration.

b) The interest duration is determined from the day following the date of disbursement of the credit extension or the day following the date of receipt of the deposit until the end of the day immediately preceding the date of full payment for the deposit and credit extension (including the first day, omitting the last day of the interest duration) and the time to determine the balance for interest calculation is at the end of any day within the interest duration.

3.Regarding deposits or loans that the time limit from the receipt of deposits or the time of disbursement of loans until the full payment of deposits or credit extensions of them is less than one day: the credit institution shall negotiate with the client on the interest duration which is from the time of receipt of the deposits or the time of disbursement of the loan to the time of full payment for such deposit or loan but not exceed a day. 

4.The credit institution and the client may negotiate on the interest rate and interest calculation method in accordance with the law on receipt of deposits, credit extensions and this Circular.

Article 5. Transparency of interest rate

1.Interest calculation method

a) Interest calculation factors:

(i) Interest duration is determined in accordance with Point a Clause 2 Article 4 hereof.

(ii) Actual balance is the deposit balance, the due principal balance, the overdue principal balance and the actual balance of interest of late payment which is payable by the deposit recipient or borrower to the depositor or the creditor at the beginning of the day. It is used in calculation of interest according to the agreement and the law on receipt of deposits and credit extensions.

(iii) Number of days allowed for maintaining actual balance is the number of days in which the actual balance at the beginning of the day remains unchanged.

(iv) Stated interest rate is expressed in % per year in accordance with Clause 1 Article 4 hereof.

b) Interest calculation formula:

The interest of each interest period is determined as follows:

-The interest in one day is determined as follows:

Interest in interest period equals (=) total daily interest of all days in the interest period

-If the number of days of maintenance of the actual balance is more than one (01) day in the interest period, the following reduced formula may be used to calculate interest:

2.Transparency of interest rate

a) As regards deposits and credit extensions on which the agreement is made in writing in the form of a specific agreement or a framework agreement and specific agreement:

(i) Written agreement on receiving deposits and granting credit between credit institutions and clients must contain information about methods of interest calculation and interest rates; in cases of application of adjustable interest rates, the written agreement must contain the principles and factors for determining the adjustable interest rate and at the time of adjustment, the credit institution is obliged to notify the client in writing of the adjustable interest rates.

(ii) As regards deposits and arrangements in which the term thereof is at least one day and the agreed interest calculating method is different than the one specified in Clause 1 this Article: Apart from complying with Point a(i) this Clause, the credit institution shall specify the annual interest  corresponding to the interest calculating method specified in Clause 1 this Article in the written agreement on deposits and credit extensions; in cases of applying adjustable interest rates, the credit institution shall specify the annual interest corresponding to the interest calculating method specified in Clause 1 this Article by issuing the written notice on adjustable interest rates at the time of adjustment.

b) As regards deposits and credits which are received and granted under the model contracts and general terms and conditions of deposit receipt and credit extension arrangements:

(i) Credit institutions shall clarify information on the model contracts or general terms and conditions under the law on deposits and credit extensions. In addition, the credit institution must publicly disclose information on the interest calculating method at the head office and post such information on its website (if any).

Before the transaction is made, the credit institution shall provide sufficient information on the interest calculating method and the interest r4ate; in cases of application of adjustable interest rates, the provided information must contain the principle and factors for determining the adjustable interest rate and at the time of adjusting the interest rate, the credit institution shall notify the client in writing the adjustable interest rates. The credit institution must obtain the client’s confirmation on the receipt of sufficient information if provided by the law on receipt of deposits and credit extensions.

(ii) As regards deposits and arrangements in which the term thereof is at least one day and the agreed interest calculating method is different than the one specified in Clause 1 this Article: Apart from complying with Point b(i) this Clause, the credit institution shall provide the client the annual interest  corresponding to the interest calculating method specified in Clause 1 this Article; in cases of applying adjustable interest rates, the credit institution shall notify the client on the adjustable interest rate and the annual interest  corresponding to the interest calculating method specified in Clause 1 this Article.

Article 6. Accounting regime

The credit institution shall account for the income and interest expenses in accordance with the law on accounting and other relevant law provisions.

Article 7. Responsibilities of the State Bank units

1. The Department of Finance and Accounting shall be in charge of handling difficulties in the implementation of this Circular.

2.The bank supervision and inspection agency shall supervise, inspect the implementation of this Circular and handle violations in accordance with their competence.

Article 8. Transitional provisions

1.The interests of deposits and credit extensions occurring from agreements between credit institutions and clients on calculating methods before the effective date of this Circular shall be kept calculating as prescribed in signed agreements in accordance with the law at the time of signing; any amendments to regulations on the method of calculating interests shall be consistent with this Circular.

2.The interests of deposits and credit extensions not occurring from agreements between credit institutions and clients on calculating methods before the effective date of this Circular shall be calculating as follows:

a) Regarding deposits with no term agreement: From the effective date of this Circular, credit institutions shall calculate interests in accordance with this Circular and notify it to clients.

b) Regarding deposits with term agreements: From the effective date of this Circular, credit institutions shall continue to calculate interests in accordance with methods applying before the effective date of this Circular until the end of terms; any supplements to the methods of calculating interests shall be consistent with this Circular.

Article 9. Implementation

1.This Circular takes effect on January 01, 2018.

2.To annul below documents from the effective date of this Circular.

a) Decision No. 652/2001/QD-NHNN dated May 17, 2001 of the Governor of the State Bank on promulgation of method of calculating and accounting of revenues and payment of interest of the State Bank and credit institutions;

b) Decision No. 51/2006/QD-NHNN dated October 06, 2006 of the Governor of the State Bank on cancellation of Article 4 of method of calculating and accounting of revenues and payment of interest of the State Bank and credit institutions promulgated together with Decision No. 652/2001/QD-NHNN dated May 17, 2001 of the Governor of the State Bank;

c) Clause 2 Article 13 Decision No. Decision No.1160/2004/QD-NHNN dated September 13, 2004 of the Governor of the State Bank on the issuance of the regulation on savings.

3.Chief of Office, Director General of the Department of Finance and Accounting, Chief Inspector of Banking Inspectorate and Supervisory Agency, Head of units of the State Bank, General Manager of State Bank branches at provinces, Chairman of Board of Directors, Chairman of Board of Members and General Director (Director) of credit institutions shall be responsible for the implementation of this Circular./.

For the Governor

The Deputy Govenor

Dao Minh Tu