Circular No. 29/2016/TT-NHNN dated October 12, 2016 stipulating overdraft and overnight lending applicable in the inter-bank electronic payment

THE STATE BANK OF VIETNAM

Circular No. 29/2016/TT-NHNN dated October 12, 2016 stipulating overdraft and overnight lending applicable in the inter-bank electronic payment

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

Pursuant to the Law No. 47/2010/2016 on credit institutions dated June 16, 2010;

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

At the proposal of the Director of the Monetary and Policy Department;

The State Governor promulgates the Circularon overdraft and overnight lending applicable in the inter-bank electronic payment;

Article 1.Scope of application

This Circular stipulates on overdraft and overnight lending applicable in the inter-bank electronic payment at the Vietnam State Bank (hereinafter referred to as the Vietnam Sate Bank) to credit institutions, foreign bank branches.

Article 2.Interpretation of terms

Under this Circular, these terms are interpreted as follows:

1. Overdraft in the inter-bank electronic payment means credit institutions are entitled to make payment in excess of the credit balance in their Vietnamese dong clearance account opened at the Banking Operation Department of the State Bank of Vietnam (hereinafter referred to as Vietnamese dong clearance account).

2. Overnight lending in the inter-bank electronic payment means the State Bank of Vietnam extends loans secured by the mortgage of valuable papers to credit institutions within the period of time commencing from the previous working day to the following working day.

3. The remaining time of valuable papers are time commencing from the day that the State Bank determines valuable papers to payment date of those valuable papers.

Article 4.Principles of overdraft and overnight lending applicable in the inter-bank electronic payment at the Vietnam State Bank

1. Credit institutions are entitled to overdraft for compensate for the shortage of capital in the inter-bank electronic payment.

2. Credit institutions that the State Bank lends overnight to pay overdraft items at the end of working day

Article 5. Valuable papers used in overdraft and overnight lending applicable in the inter-bank electronic payment at the Vietnam State Bank

Valuable papers used in overdraft and overnight lending applicable in the inter-bank electronic payment at the Vietnam State Bank must satisfy following conditions:

1. They are permitted for use in transactions with and payment to the State Bank of Vietnam in accordance with provisions of applicable laws;

2. They can be transferred;

3. They are issued in Vietnamese dong;

4. The remaining payment term is 30 days;

5. They must be in the list of valuable papers used on overdraft and overnight lending applicable in the inter-bank electronic payment at the Vietnam State Bank decided by the State Bank Governor.

Article 6.Overdraft limit

Overdraft limit is the maximum amount of money that credit institutions are permitted using to pay in the Vietnamese dong clearance account of credit institution inthe inter-bank electronic payment and it shall be determined as follows:

Overdraft limit = ∑(Gi x Ri) – B – C

Of which:

- Gi: value of valuable papers with the price of type i that credit institutions use in overdraft transaction and overnight lending and shall be determined according to the Appendix promulgated together with this Circular.

- Ri: percentage (%) of overdraft and overnight lending for valuable papers of type i that the State Bank Governor decides in each period;

- i: type of valuable paper under the list of valuable papers used in overdraft transaction and overnight lending inthe inter-bank electronic payment decided by the State Bank Governor.

- B: outstanding debts (including the principal and overnight interest rate).

- C: overdue outstanding debts of overnight lending (including overdue principal, overnight interest rate, interest of outstanding debts of overnight lending, interest for late payment of overnight interest).

Article 7.Overnight lending interest rate

1. The interest rate applicable to overnight lending shall be stipulated by the Governor of the State Bank of Vietnam in each period;

2. The interest rate applicable to overdue overnight outstanding principle is 150% of overnight lending as stipulated at the time of lending; interest rate applicable to late payment of overnight lending is 10%/year.

Article 8. Process of the overdraft and overnight lending applicable in the inter-bank electronic payment

1. Process of the overdraft and overnight lending applicable in the inter-bank electronic payment:

a) Credit institutions shall deposit valuable papers as mortgaged for overdraft and overnight lending;

b) The State Bank shall notify on overdraft limit to credit institutions;

c) Credit institutions are implemented overdraft and overnight lending;

d)  Credit institutions shall pay overnight outstanding balance;

dd) The State Bank shall collect overnight outstanding balance;

e) The State Bank shall handle with cases that credit institutions have overdue overnight outstanding balance and other arising problems;

2. The State Bank Governor shall promulgate regulations on process of the overdraft and overnight lending applicable in the inter-bank electronic payment as stipulated under Clause 1 of this Article.

Article 9.Implementation of overdraft and overnight lending

1. Implementation of overdraft

At 8 o’clock of every working day, the State Bank (Banking Operations Department)shall determine and notify overdraft limit inthe inter-bank electronic payment for each credit institution. If there is any change on overdraft limit (increasing or decreasing) in the working day due to changes of valuable papers used onoverdraft and overnight lending, overnight outstanding debts and overdue overnight outstanding debts, the State Bank shall (Banking Operations Department) shall determine and notify to credit institutions. Credit institutions shall be only decreased valuable papers used for overdraft and overnight lending if remaining valuable papers ensure overdraft limit after being adjusted to be equal to overdraft amount used;

b) When Vietnamese dong clearance account of credit institutions fails to pay in the inter-bank electronic payment, it shall be automatically overdraft with the maximum amount to be equal to overdraft limit as notified by the State Bank (Banking Operations Department) to pay. When Vietnamese dong clearance account of credit institutions is added more money, automatic payment system shall refund overdraft amount in the day of credit institutions.

2. Implementation of overnight lending

a) At the end of working day, if overdraft amount of credit institutions has not been finalized, the State Bank (Banking Operations Department) shall automatically transfer overdraft amount that has not been finalized into overnight lending account and notify to credit institutions on overnight outstanding debts. Credit institutions shall pay overnight interest rate as stipulated under Clause Article 7 of this Circular and send notification on overdue outstanding debts to credit institutions.

Article 10.Handling with cases of overdue overnight outstanding balance

1. On the following working day, the State Bank (Banking Operation of Department) shall collect overdue overnight outstanding balance (collecting the principal first and interest later) and notify credit institutions the following contents:

a) To use the Vietnamese dong clearance account of credit institutions at the Vietnam State Bank to recover overdue outstanding balance of overnight lending;

b) If the Vietnamese dong clearance account of credit institutions is used, it fails to recover overdue outstanding balance, the State Bank (Banking Operations Department) is entitled to request depository organizations to transfer valuable papers from credit institutions to the State Bank to sell valuable papers when they are not on due date or pay issuing organizations when they are due until overdue outstanding balance is fully collected. The priority order of valuable paper that is transferrable to the State Bank:

(i) Remaining time of valuable papers is shorter;

(ii) Value of mortgaged valuable papers is higher;

In case the State Bank sells valuable papers when they are not on due date or pay issuing organizations when they are due and the amount of money that is collected is higher than overdue outstanding balance of overnight lending, the difference(from selling valuable papers or paying valuable papers to issuing organizations) and remaining outstanding balance of overnight lending shall be returned to credit institutions.

c) After implementing measures as stipulated under Point a, Point b of this Clause, overdue outstanding balance of overnight lending is not fully collected, the State Bank (Banking Operations Department) shall collect from other sources (if any) of credit institutions.

2. Credit institutions whose outstanding balance of overnight lending is overdue for 3 consecutive times in a month, theState Bank (Banking Operations Department) shall pause overdraft and overnight lending applicable in the inter-bank electronic payment in 10 working days since the State Bank(Banking Operations Department) notifies on pausing overdraft and overnight lending, excluding cases that is irresistible and notify to the State Bank (Banking Operations Department).

Article 11. Responsibilities of units

1. Responsibilities of units of the State Bank of Vietnam

1.1. Monetary – Policy Department

a) To assume the prime responsibility and consult the State Bank Governor to decide and publish overnight lending interest rate as stipulated under Clause 1 Article 7 of this Circular;

b) To assume the prime responsibility and consult the State Bank Governor the list of valuable papers used on overdraft and overnight lending applicable in the inter-bank electronic payment as stipulated under Clause 5 Article 5 of this Circular and the percentage of overdraft and overnight lending for valuable papers as stipulated under Article 6 of this Circular.

1.2.Banking Operations Department

a) To assume the prime responsibility and consult the State Bank Governor to promulgate the Decision on process of the overdraft and overnight lending applicable in the inter-bank electronic payment in accordance with regulations as stipulated under this Circular and other regulations;

b) To determine and adjust overdraft limit overdraft, notify to credit institutions as stipulated under this Circular;

c) To implement overdraft and overnight lending;

d) To notify to credit institutions on overdraft and overnight lending, overdue outstanding balance;

dd) To collect overdue outstanding balance of overnight lending;

e) To collect overdue outstanding balance of overnight lending as stipulated under this Circular;

g) To notify to credit institutions on measures of collecting overdue outstanding balance of overnight lending, notify on pausing overdraft and overnight lending as stipulated under this Circular;

h) To calculate interest rate of overnight lending, excessive interest of

i) To act as a focal point to handle with difficulties and problems arising during the process of overdraft and overnight lending.

1.3. Finance – Accounting Department

To guide the accounting onoverdraft and overnight lending applicable in the inter-bank electronic payment at the State Bank;

1.4. Informatics Technology Department of the Bank

To take responsible for informatics software and arising problems to implement overdraft and overnight lending applicable in the inter-bank electronic payment in a safe and efficient way;

2. Responsibilities of credit institutions

To comply with and take responsible to implement regulations as stipulated under this Circular.

Article 12. Implementation organization

1. This Circular takes effect on March 25, 2017 and replaces the Decision No. 04/2007/QD-NHNN dated January 22, 2007 of the State Bank Governoron overdraft and overnight lending applicable in the inter-bank electronic payment.

2. Overnight lending items that have outstanding debts before this Circular takes effect shall be implemented according to the Decision No. 04/2007/QD-NHNN dated January 22, 2007 of the State Bank Governor onoverdraft and overnight lending applicable in the inter-bank electronic payment.

3. Director of the Office, Director of Monetary - Policy Department, Heads of units of the State Bank of Vietnam, Managers of the State Bank Branches in provinces, cities under the central Governments management; Chairperson of the Board of Directors and General Mangers (Managers) of credit institutions, foreign bank branches shall be responsible for the implementation of this Decision.

For the Governor of the State Bank of Vietnam

The DeputyGovernor

Nguyen Thi Hong