Circular No. 29/2014/TT-NHNN dated October 09, 2014 of the Vietnam State Bank guiding commercial banks to coordinate with Vietnam Development Bank in the implementation of guarantee mechanism for small- and medium-sized enterprises borrowing capital as stipulated under the guarantee regulation promulgated together with the Decision No. 03/2011/QD-TTg dated January 10, 2011 of the Prime Minister

THE STATE BANK OF VIETNAM

Circular No. 29/2014/TT-NHNN dated October 09, 2014 of the Vietnam State Bank guiding commercial banks to coordinate with Vietnam Development Bank in the implementation of guarantee mechanism for small- and medium-sized enterprises borrowing capital as stipulated under the guarantee regulation promulgated together with the Decision No. 03/2011/QD-TTg dated January 10, 2011 of the Prime Minister

Pursuant to the Law on Vietnam State Bank No. 46/2010/QH12 dated June 16, 2010;

Pursuant to the Law on Credit Institutions No. 47/2010/QH12 dated June 16, 2010;

Pursuant to the Decree No. 156/2013/ND-CP dated November 11, 2013 of the Government defining the functions, tasks, powers and organizational structure of the State Bank of Vietnam;

Pursuant to the Decree No.56/2009/ND-CP dated June 30, 2009 of the Government     on assistance to the develop­ment of small- and medium-sized enterprises;

Pursuant to the Decision No. 03/2011/QD-TTg dated January 10, 2011 of the Prime Minister promulgating regulations of guarantee for small and medium-sized enterprises to borrow capital at commercial banks;

At the proposal of the Director of the Department of Credit for all economic sectors;

The State Bank Governor promulgates the Circular No. 29/2014/TT-NHNN dated October 09, 2014 of the Vietnam State Bank guiding commercial banks to coordinate with Vietnam Development Bank in the implementation of guarantee mechanism for small- and medium-sized enterprises borrowing capital as stipulated under the guarantee regulation promulgated together with the Decision No. 03/2011/QD-TTg dated January 10, 2011 of the Prime Minister

Chapter I

GENERAL PROVISIONS

Article 1. Scope of application

This Circular guides commercial banks to coordinate with Vietnam Development Bank in the implementation of guarantee mechanism for small- and medium-sized enterprises borrowing capital as stipulated under the guarantee regulation promulgated together with the Decision No. 03/2011/QD-TTg dated January 10, 2011 of the Prime Minister

Article 2. Subjects of application

1. The State Commercial Banks, Joint Stock Commercial Banks, Joint Venture Banks, Banks with 100% foreign capital, branches of foreign banks in Vietnam (hereinafter referred to as the lender).

2. Enterprises guaranteed to borrow capital by Development Bank being small and medium-sized enterprises (excluding the super-small enterprises) as stipulated under the Decree No.56/2009/ND-CP dated June 30, 2009 of the Government on assistance to the develop­ment of small- and medium-sized enterprises (hereinafter referred to as the customer).

3. Development bank and related organizations, individuals in the course of implementing regulations of guarantee;

Article 3. Principles of lending

1. The production business projects considered for loans guaranteed by Development Bank are the projects belonging to the sectors, fields as stipulated under Clause 2 Article 3 of guarantee regulations.

2. The lender shall consider, decide on the loans guaranteed by Development Bank as specified by current regulations on the lending of credit institutions for customers, regulations of this Circular and other related regulations.

Chapter II

SPECIFIC PROVISIONS

Article 4. Agreements on coordination

1. The lender and Development Bank shall make a written agreement on the coordination for loans with guarantee of Development Bank (hereinafter referred to as agreements on coordination before signing the credit contract, including the following contents: orders of coordination among parties in receiving and handling with borrowing demands with guarantee of the customers; provision of disbursement documents; examination of use of the borrowing capital, assets originating from the borrowing capital (called examination of the borrowing capital); adjustment of debt term, extension of debt; performance of guarantee obligations.

2. The lender, Development Bank and the customer shall draw up a written agreement to ensure that the lender shall have rights to receive and handle with guaranteed assets in the case that Development Bank refuses to perform its guarantee obligations as stipulated under this Circular and other related regulations.

Article 5. Notice on lending approval

1. The notice of loan approvalis the document made by the lender to notify on approval for the loan if the loan is guaranteed by Development Bank. The notice of loan approvalis not used to replace the credit contract of the loan.

2. The content of the notice of loan approvalis the basis for Development Bank to sign the guarantee contract and issue the guarantee document for loans to the customers. Contents stated in thenotice of loan approval, guarantee contract and guarantee documents must be coherent and in line with the current regulations related to the lending and guarantee for customers.

3. The notice of loan approvalincludes the basic contents: name of the customer, name of the project, using purpose of the borrowing capital, total capital (ownership capital, borrowing capital and other sources of capital), total amount of money approved for the loan (amount of money guaranteed by Development Bank, amount of money guaranteed by other measures or not applied guarantee measures), time for the loan, payment term, regulations on capital disbursement, the valid time of the notice of loan approval(if any). If there is regulation on the effective time, the lender shall only consider on signing the credit contract within the effective time of the lending approval notification.

Article 6. Signing the credit contract

Within 07 working days since the full receipt of the original guarantee document issued by Development Bank, the lender shall consider:

1. To sign the credit contract with the customer if the contents of the guarantee document are in accordance with the contents ofthe written notice of loan approval.

2. To notify in writing to the customer and Development Bank if refusal and clearly mention the reasons, and return the original guarantee document to Development Bank.

Article 7. Disbursement, examination of the borrowing capital

1. Provision of the disbursement documents: the lender shall provide copies of the disbursement documents and dossiers related to the disbursement for Development Bank right after each disbursement of the borrowing capital as the basis on coordination of examination of the borrowing capital.

2. Examination of the borrowing capital: the lender and Development Bank shall reach an agreement on the time for examination, supervision of use of the borrowing capital, asset originating from the borrowing capital in order to ensure that the use of the borrowing capital is in accordance with the lending purposes. The examination of the borrowing capital must be written by related parties. The examination minute is the basis for Development Bank to fulfill the guarantee obligations.

Article 8. Adjustments of payment term, extension of debt

1. The lender shall consider on adjustment of payment term, extension of debt for customers as stipulated by the current law on the basis of agreement with Development Bank.

2. The process of implementing adjustment of payment term, extension of debt is as follows:

a) The lender shall send a written plan on adjustment of payment term, extension of debt for customers.

b) Within 07 working days since the full receipt of the document from the lender, Development Bankmust provide written responseto the lender on agreeing or disagreeing with the adjustment plan on payment term, extension of debt. If agree, Development Bank shall implement the amendments, supplements of the guarantee document for loans that are in line with the contents of the adjustment plan on payment term, extension of debt of the lender.

c) The lender shall only implement the adjustment on payment term, extension of debt when it receives the approval document on adjustment on payment term, extension of debt and amendments in the guarantee documents related to adjustment on payment term, extension of debt of the customer from Development Bank.

Article 9. Performance of guarantee obligation

1. Development Bank shall implement the guarantee obligations as stipulated under the guarantee document and regulations related to the guarantee.

2. The lender and Development Bank shall reach a specific agreement in writing on cases that Development Bank shall have rights to refuse the guarantee obligations as specified under Clause 4 Article 19 of the guarantee regulation based on the following principles:

a) Development Bank shall have rights to refuse the whole guarantee obligations when the lender disburses a part or the whole part of the borrowing part inconsistent with the purpose.

b) If the lender disburses the borrowing capital in line with the purpose but fails to perform the examination, supervision of the borrowing capital, assets originating from the borrowing capital that causes the misuse of the borrowing capital, assets originating from the borrowing capital, Development Bank shall only refuse to pay the amount of money that is equivalent to the part of borrowing capital, assets originating from the borrowing capital that the customer misuses.

c) Within 07 days since the due debt payment but the customer fails to pay or pay insufficiently, the lender shall determine the causes and apply the debt collection measures as stipulated and send a written request to Development Bank on performing the guarantee obligation committed as stipulated under the guarantee regulation and guidelines under this Circular.

4. Within 30 days since the full receipt of the documents on requesting to perform the guarantee obligation of the lender, Development Bank must complete the guarantee obligation as committed. In the case of refusal, Development Bank must provide a written response to the lender and clearly mention the reasons for its refusal. If it exceeds 30 days since the receipt of the document on requesting to perform the guarantee obligation of the lender, Development Bank fails to provide a written response on its refusal; it shall be automatically considered that Development Bank approves the implementation of the guarantee obligation as committed.

5. Within 07 working days since the receipt of the refusal document from Development Bank, the lender must provide an approval document or disapproval document on the refusal of Development Bank. If it exceeds this time limit, the lender shall be considered that it approves the refusal of Development Bank if it doesn’t issue any response documents to Development Bank.

Article 10. Transfer of guaranteed property

When receiving the document on the approval of the lender on the refusal of performing the guarantee obligation, Development Bank shall deal with the guaranteed assets of the customer as follows:

1. If refusing to perform the whole part of guarantee obligation: Development Bank shall transfer the rights of receiving and dealing with the guaranteed property of the customer to the lender according to the coordination agreements as stipulated under Clause 2 Article 4 of this Circular. The lender shall return the original guarantee document to Development Bank after Development Bank transfers the guaranteed property.

2. If refusing a part of guarantee obligation:

a) For approved guarantee obligation: Development Bank shall perform the payment on behalf of the customer (including the original and interest rate).

b) For disapproved guarantee obligation: Development Bank shall coordinate with the lender to deal with guaranteed assets of the customer. The money collected from dealing with guaranteed assets shall be paid according to the debit balance ratio of the customer at the guarantee party (part of debt paid on behalf of the customer) and debit balance of the customer at the lender party (part of debit balance refused). After paying the original amount, interest amount and arising expenses related the loan, the money collected from dealing with guaranteed assets still remains, Development Bank shall transfer to deposit account of the customer.

Article 11. Classification and risk provision

The lender shall classify, set up and use the provision to handle risks for loan items as stipulated by the Vietnam State Bank and other related regulations.

Article 12. Handling violations

1. Depending on the nature and seriousness of the violation, organizations, individuals that violate regulations of this Circular, other related regulations shall be fined in accordance with the law.

2. During the lending period, if the lender detects any violation of agreements stated in the credit contract, violation of the law or receives the written request of Development Bank on terminating the lending and revokingdebt before termas stipulated under Point d Clause 1 Article 16 of the guarantee regulations, the lender shall immediately terminate the lending andrevoke debt before term. Credit contract shall be continued only when causes, seriousness of violation are determined and violations are corrected, these violations have no effects on the efficiency of the project, debt service coverage ability of the customer and Development Bank issues a written decision on continuing the credit contract.

Article 13. Reporting

1. On a monthly basis, the lender shall summarize the situation of lending to small- and medium-sized enterprises with guarantee of Development Bank in accordance with the DecisionNo. 03/2011/QD-TTg and report to the Vietnam State Bank as stipulated by current regulations of the State Bank Governor on reporting regime applied for units under the Vietnam State Bank and credit institutions, branches of foreign banks.

2. Monthly, on the 10th, Development Bank shall summarize the situation of guarantee to small- and medium-sized enterprises borrowing capital from the lending banks and send to the State Bank (Department of Credit for all economic sectors) in conformity with the form on the situation of guarantee small- and medium-sized enterprises borrowing capital at commercial banks, foreign banks’ branches promulgated together with this Circular.

Chapter III

IMPLEMENTATION PROVISIONS

Article 14. Responsibilities of the lender and units of the Vietnam State Bank

1. For the lender:

a) To coordinate closely with Development Bank in lending to small and medium enterprises that are guaranteed by Development Bank as stipulated under this Circular, other related regulations in order to ensure safety, comply with the law.

b) In the course of implementation, if arising any difficulty, the lending banks should summarize and report to the State Bank (Department of Credit for all economic sectors).

2. Units of the Vietnam State Bank:

a) Department of Credit for all economic sectors:

- To act as a focal point to supervise, summarize the lending activities of banks for small and medium enterprises that are guaranteed by Development Bank.

- To assume the prime responsibilities to deal with problems arising in the course of implementing this Circular;

b) Banking Inspection and Supervision Agencies shall perform the inspection, supervision and handle related parties in compliance with provisions of guarantee regulations and this Circular when lending to enterprises that are guaranteed by Development Bank.

c) The Department of Finance – Accounting shall guide the lending banks to enter in the account for loans guaranteed by Development Bank.

d) State Bank branches of provinces, cities under the Central management shall examine, supervise and inspect banks in the local area in lending to small- and medium-sized enterprises guaranteed by Development Bank, propose to the Governor of the Vietnam State Bank and Chairperson of People’s Committee of provinces, cities under the Central for the settlement of arising issues.

Article 15. Effect

1. This Circular takes effect on October 10, 2014.

2. The Circular No. 12/2009/TT-NHNN dated May 28, 2009 providing guidance on several contents related to guaranteed loan by Vietnam Development Bank under the regulation on providing guarantee to enterprises that borrow capital from commercial banks issued in conjunction with the Decision Do. 14/2004/QD-TTg and Decision No. 60/2009/QD-TTg of the Prime Minister shall be ceased to effect since the effective day of this Circular.

3. For credit contracts signed before the effective day of this Circular, it shall be implemented according to the signed agreements until the expiration day of the credit contract.

Article 16. Organization of implementation

The Chief of Offices, Director of the Department of Credit for all economic sectors, heads of units under the Vietnam State Bank, Directors of the State Bank’s branches of provinces, cities under the Central; Chairperson of the Board of Management; Chairperson of the Board of Members; General Manager (Manager) of commercial banks, foreign banks’ branches, small and medium borrowing enterprises, development banks shall be responsible for implementing this Circular.

For the Governor of the State Bank of Vietnam

The Deputy Governor

Nguyen Dong Tien