Circular No. 21/2017/TT-NHNN dated December 29, 2017 of the State Bank of Vietnam on loan disbursement methods of credit institutions and branches of foreign banks

THE STATE BANK OF VIETNAM

Circular No. 21/2017/TT-NHNN dated December 29, 2017 of the State Bank of Vietnamon loan disbursement methods of credit institutions and branches of foreign banks

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 amendments to the Law on Credit Institutions dated November 20, 2017;

Pursuant to the Government’s Decree No. 101/2012/ND-CP dated November 22, 2012 on non-cash payment and the Government s Decree No. 80/2016/ND-CP dated July 01, 2016 on amendments to certain articles of the Government’s Decree No. 101/2012/ND-CP dated November 22, 2012 on non-cash payment;

Pursuant to the Government’s Decree No. 222/2013/ND-CP dated December 31, 2013 on cash payment;

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;

At the request of the Director of the Monetary Policy Department;

The Governor of the State Bank of Vietnam promulgates a Circular to provide for loan disbursement methods of credit institutions and branches of foreign banks.

Article 1. Scope of adjustment

1. This Circular provides for loan disbursement methods including the use of non-cash payment and cash payment services by credit institutions and branches of foreign banks in order to disburse funds to borrowers.

2. The disbursement of loans granted by banks for social policies shall not be governed by regulations in this Circular.

Article 2. Subject of application

1. Credit institutions and branches of foreign banks that provide loans in accordance with regulations of the State Bank of Vietnam (hereinafter referred to as the “lending credit institution”).

2. Clients who apply for loans from credit institutions or branches of foreign banks (hereinafter referred to as the “borrower”).

3. Beneficiaries.

4. Other credit institutions and branches of foreign banks, payment service providers and intermediary payment service providers involved in lending transactions of the lending credit institutions.

Article 3. Interpretation of terms

For the purpose of this Circular, the terms below are construed as follows:

1. “Beneficiary” refers to a juridical person, individual, household, artel or other non-juridical organization entitled to a right to payments from a borrower in sale or establishment of property, service provision or another legal relationship of a demand for loan under the loan agreement entered into by and between that borrower and the lending credit institution (hereinafter referred to as the “loan agreement”).

2. “Loan disbursement” means the lending credit institution s paying out of money by means of either non-cash payment service or cash payment service to a borrower in order to make payments to a specific beneficiary according to the loan purpose designated in the loan agreement.

3. “Concentrated financial management” refers to a borrower’s act of using payment services via an account opened at a credit institution or foreign bank s branch to manage the borrower’s funds.

4. “Financial management service provider” means the credit institution or foreign bank’s branch that provides concentrated financial management to the borrower.

Article 4. Loan disbursement with using non-cash payment service

1. The lending credit institution must use non-cash payment services in accordance with law regulations in order to transfer borrowed fund to the beneficiary’s checking account opened at the payment service provider, except cases mentioned in Clause 2 of this Article. The lending credit institution must transfer of disbursed amounts into the beneficiary’s checking account opened at the payment service provider immediately within the disbursement date for the loan purpose specified in the loan agreement. In case the loan disbursement is made after the daily settlement times of the lending credit institution, disbursed amounts shall be transferred on the following business day of that lending credit institution.

2. The lending credit institution must use non-cash payment services to transfer borrowed funds to the borrower’s checking account opened at the payment service provider in the following cases:

a) The borrower makes payment for loan purpose which must be made via the borrower s checking account as required by law;

b) The borrower, who is also the beneficiary, has the checking account opened at the payment service provider and has advanced money from the borrower’s equity to pay/cover expenditures for the business plan/project or the plan/project serving personal life approved by the lending credit institution in accordance with the law;

c) The borrower makes direct payment for products in the fields of agriculture, forestry, salt production and aquaculture purchased from individuals, households, farm owners, household businesses and artels, whose business and production activities are carried in a rural area, in order to implement the borrower’s business plan in conformity with the loan purpose specified in the loan agreement.

Article 5. Loan disbursement in cash

1. The lending credit institution may consider disbursing loan funds in cash in the following cases:

a) The borrower makes payment to a beneficiary (other than a juridical person) who fails to have a checking account opened at the payment service provider;

b) The borrower, who is also the beneficiary (other than a juridical person), fails to open a checking account o at the payment service provider but has advanced money from the borrower’s equity to pay/cover expenditures for the business plan/project or the plan/project serving personal life approved by the lending credit institution in accordance with the law.

2. The borrower must provide the lending credit institution with the beneficiary’s written commitment, which indicates that the beneficiary has no checking account opened at the payment service provider.

Article 6. Loan disbursement with using non-cash payment or cash payment service

The lending credit institution may consider deciding to disburse loan funds by either non-cash payment or cash payment service in the following cases:

1. The borrower makes payment to the beneficiary (other than a juridical person) that has the checking account opened at the payment service provider provided that the loan amount specified in the loan agreement shall not exceed VND 100,000,000 (One hundred million dongs).

2. The borrower makes payment to the beneficiary that is a state-owned organization entitled to receive payments in cash in accordance with regulations of the State Bank of Vietnam.

Article 7. Disbursement in specific cases

1. In case of a syndicated loan of which funds must be disbursed via a credit institution that plays the role of the payment agent (including cases where a credit institution takes the roles of both arranger and payment agent of a syndicated loan): Participating lenders of a syndicated loan shall reach an agreement on disbursement method as prescribed in Article 4, Article 5 and Article 6 herein. The payment agent shall make payment to the beneficiary immediately within the day when it receives loan funds disbursed from participating lenders or the arranger of the syndicated loan. If the payment agent receives loan funds transferred after its daily settlement times, it shall transfer such loan funds to the beneficiary on the following business day.

2. In case the borrower uses concentrated financial management service at a financial management service provider other than the lending credit institution: The lending credit institution shall decide to adopt the disbursement method as prescribed in Article 4, Article 5 and Article 6 herein. The financial management service provider shall make payment to the beneficiary immediately within the day when it receives loan funds disbursed from the lending credit institution. If the financial management service provider receives loan funds transferred after its daily settlement times, it shall transfer such loan funds to the beneficiary on the following business day.

3. In case the borrower must use the loan funds in VND to purchase foreign currency to make payments to the beneficiary for the loan purpose specified in the loan agreement:

a) If the borrower purchases foreign currency from the lending credit institution:

(i) In case the borrower uses concentrated financial management service at a credit institution or foreign bank s branch other than the lending credit institution: The lending credit institution shall disburse loan funds to the borrower when it has enough foreign currency to sell to the borrower. The lending credit institution shall transfer the foreign currency amounts to be sold out to the borrower’s dedicated deposit account opened at the financial management service provider. The financial management service provider shall use non-cash payment service to make payments to the beneficiary at the request of the lending credit institution in conformity with regulations herein;

(ii) In case the borrower fails to use the concentrated financial management service or uses the one at the lending credit institution: The lending credit institution shall disburse loan funds to the borrower when it has enough foreign currency to sell to the borrower. The lending credit institution shall transfer the foreign currency amounts to be sold out to the borrower’s dedicated deposit account opened at the lending credit institution. The lending credit institution shall use non-cash payment service to make payments to the beneficiary in conformity with regulations herein.

b) If the borrower purchases foreign currency from a credit institution or foreign bank s branch (including financial management service provider) other than the lending credit institution:

(i) In case the borrower uses concentrated financial management service at a credit institution or foreign bank s branch other than the lending credit institution: After receiving the loan funds disbursed from the lending credit institution, the credit institution or foreign bank s branch shall sell foreign currency to the borrower by transferring this foreign currency amount to the borrower’s dedicated deposit account opened at the financial management service provider. The financial management service provider shall use non-cash payment service to make payments to the beneficiary at the request of the lending credit institution in conformity with regulations herein;

(ii) In case the borrower fails to use the concentrated financial management service or uses the one at the lending credit institution: After receiving the loan funds disbursed from the lending credit institution, the credit institution or foreign bank s branch shall sell foreign currency to the borrower by transferring this foreign currency amount to the borrower’s dedicated deposit account opened at the lending credit institution. The lending credit institution shall use non-cash payment service to make payments to the beneficiary in conformity with regulations herein.

Article 8. Other provisions

1. The lending credit institution shall:

a) Consider deciding to adopt an appropriate disbursement method in accordance with regulations herein on the basis of information, documents and payment vouchers provided by the borrower, and assume responsibility for its decision;

b) Specify disbursement methods in its internal regulations on lending and loan management in conformity with regulations herein and relevant laws;

c) Closely control the disbursement of loan funds into the borrower’s checking account so as to ensure that the borrower shall use loan funds for loan purpose specified in the loan agreement only;

d) Inform borrowers of law regulations and internal regulations on disbursement methods. Both borrowers and credit institutions or branches of foreign banks involved in disbursement of loan funds shall be informed of its daily settlement times.

2. A financial management service provider shall inform their clients and credit institutions or branches of foreign banks involved in disbursement of loan funds shall be informed of its daily settlement times.

3. Borrowers shall provide information, documents and payment vouchers as regulated by law for lending credit institutions for considering and deciding appropriate disbursement methods as regulated in this Circular. Borrowers shall assume responsibility for the accuracy and reliability of information, documents and payment vouchers provided for lending credit institutions.

Article 9. Transitional provisions

With regard to credit or loan agreements entered into before the date of entry into force of this Circular, borrowers and lending credit institutions may either continue using non-cash payment or cash payment services to disburse funds under terms and conditions of the concluded agreements in conformity with the law or modify the concluded credit or loan agreements in conformity with regulations of this Circular.

Article 10. Implementation organization

1. This Circular takes effect on April 02, 2018 and supersedes the Circular No. 09/2012/TT-NHNN dated April 10, 2012 providing for use of payment facilities for loan disbursement by credit institutions and branches of foreign banks.

2. Chief of the Ministry’s Office, the Director of the Monetary Policy Department, Heads of units affiliated to the State Bank of Vietnam, Directors of branches of the State Bank of Vietnam in provinces and central-affiliated cities, Chairpersons of the Boards of Directors, Chairpersons of the Boards of Members and General Directors (Directors) of credit institutions and branches of foreign banks shall implement this Circular./.

For the Governor

The Deputy Governor

Nguyen Thi Hong