Decree No. 97/2018/ND-CP dated June 30, 2018 of the Government on on-lending of the Government’s ODA loans and foreign concessional loans

THE GOVERNMENT		THE SOCIALIST REPUBLIC OF VIETNAM Independence - Freedom - Happiness
No. 97/2018/ND-CP		Hanoi, June 30, 2018

 

DECREE

On the on-lending of ODA loans and foreign concessional loans of the Government^[1]

 

THE GOVERNMENT

Pursuant to the June 19, 2015 Law on Organization of the Government;

Pursuant to the November 23, 2017 Law on Public Debt Management;

Pursuant to the June 25, 2015 Law on the State Budget;

Pursuant to the June 18, 2014 Law on Public Investment;

At the proposal of the Minister of Finance,

The Government promulgates the Decree on the on-lending of official development assistance (ODA) loans and foreign concessional loans of the Government.

 

Chapter I

GENERAL PROVISIONS

Article 1. Scope of regulation

This Decree prescribes the management and on-lending of ODA loans and foreign concessional loans of the Government, and the recovery of on-lent loans.

Article 2. Subjects of application

1. Borrowers of ODA loans and foreign concessional loans of the Government as defined in the Law on Public Debt Management.

2. The Ministry of Finance and on-lending agencies authorized by the Ministry of Finance.

3. Agencies, organizations and individuals involved in the management and on-lending of ODA loans and foreign concessional loans of the Government, and the recovery of on-lent loans.

Article 3. Interpretation of terms

In addition to the terms defined in the Law on Public Debt Management, in this Decree, the terms below are construed as follows:

1. Foreign loan agreement means a capital borrowing treaty, contract or agreement concluded in the name of the State or Government with a foreign lender.

2. On-lending contract means a sub-contract or sub-agreement on on-lending signed between the Ministry of Finance or an authorized on-lending agency and a borrower.

3. On-lending authorization contract means a contract signed between the Ministry of Finance and an authorized on-lending agency to authorize the on-lending, management and recovery of loans, including the mode whereby the authorized on-lending agency bears credit risks.

4. Grace period means a period of time during which the borrower of an on-lent loan has acknowledged the debt and needs not to pay the loan principal but is required to fully pay arising interest and charges under the on-lending contract.

Article 4. Formulation of on-lent loan limits for a 5-year period

1. Formulation of on-lent loan limits for a 5-year period for public non-business units and enterprises:

Before June 30 of the fifth year of a 5-year plan on loan borrowing and public debt repayment, to register a subsequent 5-year plan to borrow on-lent loans, a public non-business unit or an enterprise (below collectively referred to as borrower) shall send to the Ministry of Finance the following:

a/ An assessment of the implementation of the plan and the disbursement of the signed on-lent loans, and an estimation of the total disbursed amount in the current 5-year period;

b/ A registration of the demand for disbursement of the signed on-lent loans and demand for loans to be on-lent in the subsequent 5-year period, together with a preliminary assessment of the borrower’s capacity to arrange funding sources for debt repayment;

c/ A document showing the borrower-managing agency’s opinions about the project owners’ registration of their demands for disbursement, for enterprises and public non-business units.

2. Formulation of on-lent loan limits for a 5-year period for provincial-level People’s Committees:

The on-lent loan limit for a 5-year period for a provincial-level People’s Committee constitutes part of the local administration’s 5-year plan on loan borrowing and repayment. The procedures for formulating such limit are prescribed in the Decree on management of local administrations’ debts.

3. Based on public debt safety indicators; total loan and deficit limits of local budgets in 5-year financial plans regarding loans to be on-lent to provincial-level People’s Committees, the Ministry of Finance shall summarize demands of ministries, central agencies and localities to formulate on-lent loan limits for a 5-year period and report them to the Government for submission to the National Assembly Standing Committee or National Assembly.

Article 5. Formulation of annual on-lending plans and on-lent loan limits

1. Formulation of annual on-lending plans and on-lent loan limits for public non-business units and enterprises:

Before July 20 every year, to formulate an annual on-lending plan and on-lent loan limits, a borrower shall send to the Ministry of Finance reports on:

a/ Assessment of the use of the loan, disbursed value and amount paid for the on-lent loan of the year and their accumulated amounts from the time of beginning the use of the loan to the year preceding the planning year; and unused value, which are detailed by project and year; and,

b/ The to-be-used value of the on-lent loans already signed and to be signed, in the planning year.

2. Formulation of annual on-lending plans for provincial-level People’s Committees:

a/ An annual on-lending plan for a provincial-level People’s Committee constitutes part of the local administration’s annual plan on loan borrowing and repayment. The procedures for formulating such plan are prescribed in the Decree on management of local administrations’ debts;

b/ An annual on-lending plan for a provincial-level People’s Committee must include information about each loan, repayment of on-lent loans, and assurance of the debt repayment capacity of the local administration.

3. Based on the on-lent loan limits for a 5-year period, and registered demands of the borrowers and project owners, as well as public debt safety indicators, the Ministry of Finance shall summarize annual on-lending plans, which are detailed by loan source, and propose the Government to approve the total annual on-lent loan limit, then submit it to the Prime Minister for consideration and inclusion in the Government’s annual loan borrowing and repayment plan.

4. In case the disbursed amount exceeds the amount stated in the annual on-lending plan, the Ministry of Finance shall propose the Government to adjust such plan on the following principles:

a/ For loans on-lent to public non-business units or enterprises, the disbursement must suit the project implementation progress;

b/ For loans on-lent to provincial-level People’s Committees, the disbursed amount must not exceed the annual loan limit decided by the National Assembly.

Article 6. Currency in which loans are on-lent and recovered

1. The currency in which loans are on-lent is the currency in which foreign loans are borrowed by the Government.

2. The currency in which on-lent loans are recovered is the currency in which loans are on-lent. In case a borrower makes repayment in Vietnam dong, the on-lending agency shall apply the selling rate of the currency of on-lent loans effective at the time of loan repayment announced by the Joint-Stock Commercial Bank for Foreign Trade of Vietnam to recover the loans.

Article 7. Loan repayment term and grace period in on-lending

1. For borrowers being provincial-level People’s Committees: The loan repayment term and grace period for on-lent loans are the same as those stated in the relevant foreign loan agreement.

2. For borrowers being public non-business units or enterprises:

a/ The loan repayment term is equal to the capital recovery duration under the investment project (or feasibility study report) approved by a competent authority, but must not exceed the loan repayment term stated in the relevant foreign loan agreement;

b/ The grace period is equal to the construction period, which will last till the project is put into operation as mentioned in the investment project (or feasibility study report) approved by a competent authority, but must not exceed the grace period stated in the relevant foreign loan agreement;

c/ The loan repayment term and grace period for on-lent loans shall be counted from the beginning of the loan repayment term and grace period of the relevant foreign loan.

3. In case there is any difference in the loan repayment term and grace period between the foreign loan and on-lent loan, the amount recovered from the on-lent loan but not yet paid to the foreign lender shall be remitted into the Accumulation Fund for Debt Payment.

Article 8. On-lending interest rates

On-lending interest rates prescribed in Clause 5, Article 34 of the Law on Public Debt Management include interests rate of the Government’s foreign loans, various charges prescribed in foreign loan agreements, on-lending management charge, and on-lending risk provisions.

Article 9. Charges and related expenses payable to foreign lenders and charges applied by domestic and foreign banks

1. Borrowers shall fully pay charges and related expenses to foreign lenders as stated in foreign loan agreements and service charges applied by domestic and foreign banks which are related to the on-lent loans. Charges stated in foreign loan agreements include fund arrangement charge, management charge, commitment charge, fund withdrawal charge, insurance premium, and other charges and expenses (if any) as prescribed by law.

2. Borrowers shall pay charges and expenses to foreign lenders via authorized on-lending agencies to the Ministry of Finance. Borrowers shall pay bank service charges directly to the banks concerned.

Article 10. On-lending management charge

1. The rate of on-lending management charge is 0.25%/year of the outstanding on-lent loan, specifically as follows:

a/ Provincial-level People’s Committees shall pay the charge to the on-lending agency (the Ministry of Finance) at the rate of 0.25%/year;

b/ Enterprises and public non-business units shall pay the charge to the authorized on-lending agency at the rate of 0.25%/year, in which 0.15%/year shall be retained by such agency and 0.1%/year transferred to the Ministry of Finance.

2. The management and use of on-lending charges must comply with the financial mechanism applied by authorized on-lending agencies. The management and use of on-lending charges of the Ministry of Finance must comply with the Prime Minister’s regulations.

Article 11. On-lending risk provisions

1. On-lending risk provisions are prescribed as follows:

a/ The risk provision for on-lending loans to provincial-level People’s Committees is 0%/year of the outstanding on-lent loan;

b/ The risk provision for on-lending loans to public non-business units is 1%/year of the outstanding on-lent loan;

c/ The risk provision for on-lending loans to enterprises is 1.5%/year of the outstanding on-lent loan.

2. Setting up of on-lending risk provisions:

a/ In case an authorized on-lending agency bears no credit risks, the on-lending risk provisions shall be paid to the Accumulation Fund for Debt Payment;

b/ In case an authorized on-lending agency bears all credit risks, the on-lending risk provisions shall be paid to this agency, which shall classify loans, and set up and use risk provisions for handling credit risks in accordance with the law on credit activities and relevant legal documents.

Article 12. Late-payment interest

1. If failing to repay any loan on schedule, including the principal, interest and charges and related expenses (if any) as prescribed by law, borrowers shall pay a late-payment interest at the rate specified in Clause 2 or 3 of this Article.

2. For late payments for the principal, interest, or charges stated in the relevant foreign loan agreement, the late-payment interest rate shall be determined under such agreement. If such agreement does not specify a late-payment interest rate, such rate will be 150% of the interest rate for the Government’s foreign loans.

3. For late payments for on-lending management charge or risk provision, the late-payment interest rate will be 150% of management charge or risk provision specified in Article 10 or 11 of this Decree.

4. The number of overdue days shall be counted from the date the loan becomes due but unpaid to the date which is one day before the date the loan is actually repaid.

Article 13. Number of days in a year used for calculating interest, charges and risk provisions for on-lent loans

The number of days in a year used for calculating interest, late-payment interest, charges payable to foreign lenders, on-lending management charge, and on-lending risk provision must comply with regulations on the number of days in a year used for calculating interest stated in the relevant foreign loan agreement.

Article 14. Debt acknowledgement

Borrowers shall acknowledge debts of the on-lent loans simultaneously with the Government acknowledging debts with foreign lenders.

Article 15. Order of priority in loan recovery

1. Borrowers shall pay principals, interests and charges specified in on-lending contracts before paying other debts.

2. In case borrowers can pay only part of due liabilities, the order of priority in debt recovery is as follows: on-lending management charge, on-lending risk provision, late-payment interest, overdue interest, due interest, other charges, overdue principal then due principal.

Article 16. Loan security

1. Borrowers shall apply measures to secure loans with assets in accordance with law, unless they are exempted from loan security under Clause 4 of this Article. Loan security measures shall be specified in on-lending contracts.

2. Collaterals include assets formed from loans on-lent from the Government and other lawful assets of borrowers. Collaterals shall be approved by the Ministry of Finance in case the Government bears credit risks, or by an authorized on-lending agency in case this agency bears credit risks.

3. The value of collaterals must be at least equal to 120% (one hundred and twenty percent) of the value of the principal of an on-lent loan. In case the value of collaterals is lower than 120% of the outstanding value of the on-lent loan, the borrower shall supplement collaterals to reach the above minimum value.

4. Loan security is not required for loans on-lent to provincial-level People’s Committees or in case borrowers is unable to secure loans with assets as prescribed by law.

5. Authorized on-lending agencies and borrowers shall carry out loan security procedures in accordance with the law on secured transactions, and manage collaterals.

6. The realization of collaterals for loan recovery must comply with law. In case authorized on-lending agencies bear no credit risks, the realization of collaterals for loan recovery shall be approved by the Prime Minister.

Article 17. Repayment of on-lent loans

1. Borrowers shall arrange funding sources in their financial plans and budget estimates for fully repaying loans on schedule according to on-lending contracts. Such repayment does not depend on the performance of commercial contracts related to the on-lent loans.

2. Borrowers shall repay the loans before paying other debts.

3. Before disbursing on-lent loans, borrowers being public non-business units or enterprises shall open accounts for revenues generated from projects using on-lent loans and other lawful revenues at authorized on-lending agencies in order to prepare funding sources for loan repayment and maintain the minimum balance on such accounts as prescribed in Article 35 of this Decree.

4. When signing an on-lending contract, a borrower shall commit to irrevocably allow the authorized on-lending agency to automatically make deductions from any account of the borrower for recovering loans in case the borrower fails to fully repay the loans on schedule.

5. Within 2 working days after receiving a repayment from the borrower, the on-lending agency or authorized on-lending agency shall transfer the whole repayment (including principal, interest, charges, etc.) to the Accumulation Fund for Debt Payment after retaining the on-lending management charge as prescribed in Clause 1, Article 10 of this Decree. Policy banks authorized to on-lend different loans shall make repayments to the Ministry of Finance on a monthly basis under the Government’s Decree on management of the Accumulation Fund for Debt Payment.

Article 18. Ahead-of-schedule loan repayment

1. Borrowers may repay loans ahead of schedule if satisfying the conditions specified in foreign loan agreements after obtaining the Ministry of Finance’s approval.

2. If foreign loan agreements do not prescribe ahead-of-schedule loan repayment, borrowers may repay the loans ahead of schedule only after obtaining approval from the Prime Minister (in case the authorized on-lending agency bears no credit risks) or from the authorized on-lending agency (in case this agency bears credit risks).

3. To repay loans ahead of schedule, a borrower shall send to the Ministry of Finance and authorized on-lending agency a written request at least 90 days before the expected date of repayment for the latter to exchange opinions with the foreign lender and report such to a competent authority for consideration and decision.

4. Borrowers shall bear all arising charges and expenses for ahead-of-schedule loan repayment.

Article 19. Transfer of liabilities

1. A borrower may only transfer liabilities arising from on-lent loans in the following cases:

a/ After obtaining the Prime Minister’s approval, in case the authorized on-lending agency bears no credit risks;

b/ After obtaining approval from the authorized on-lending agency and Ministry of Finance, in case the authorized on-lending agency bears credit risks.

2. When wishing to transfer liabilities, a borrower shall report such to the Ministry of Finance or authorized on-lending agency, giving the reason, and take the initiative in the transfer after obtaining approval from the competent agency defined in Clause 1 of this Article.

 

Chapter II

ON-LENDING OF ODA LOANS OR CONCESSIONAL LOANS

Article 20. Conditions for borrowing on-lent loans

The conditions for provincial-level People’s Committees, enterprises and public non-business units to borrow on-lent loans are prescribed in Article 36 of the Law on Public Debt Management.

Article 21. On-lending rates

1. On-lending rates for provincial-level People’s Committees:

a/ For a locality with budget-balancing transfers from the central budget accounting for 70% or more of its total local budget expenditures, the on-lending rate is 30% of ODA loans or concessional loans;

b/ For a locality with budget-balancing transfers from the central budget accounting for between 50% and below 70% of its total local budget expenditures, the on-lending rate is 40% of ODA loans or concessional loans;

c/ For a locality with budget-balancing transfers from the central budget accounting for less than 50% of its total local budget expenditures, the on-lending rate is 50% of ODA loans or concessional loans;

d/ For localities with revenues transferred to the central budget (excluding Hanoi and Ho Chi Minh City), the on-lending rate is 50% of ODA loans or concessional loans;

dd/ For Hanoi and Ho Chi Minh City, the on-lending rate is 100% of ODA loans or concessional loans;

e/ Before January 1 of the first year of a budget stabilization period, the Minister of Finance shall announce the on-lending rate of ODA loans or concessional loans applicable to each province or centrally run city in such budget stabilization period.

2. On-lending rates for public non-business units:

a/ For public non-business units which self-finance all of regular expenditures and investment expenses, the on-lending rate is 100% of ODA loans or concessional loans used for investment projects;

b/ For public non-business units which self-finance all of regular expenditures and part of investment expenses, the on-lending rate is 50% of ODA loans or concessional loans used for investment projects.

3. On-lending rates for enterprises:

Enterprises which fully satisfy the prescribed conditions may borrow the whole of ODA loans or concessional loans used for investment projects, which must not exceed 70% of the total investment approved by a competent authority.

4. Application of on-lending rates:

a/ The on-lending rates specified in Clauses 1, 2 and 3 of this Article shall apply to principal loans stated in foreign loan agreements;

b/ Borrowers shall arrange their funding sources for fulfilling liabilities, including the fund arrangement charge, management charge, commitment charge, late payment interest, ahead-of-schedule loan repayment charge, and other arising expenses calculated on the whole of the Government’s ODA loans and/or concessional loans used for investment projects.

Article 22. Identification of on-lending agencies

1. The Ministry of Finance may on-lend loans directly to provincial-level People’s Committees. In this case, the Ministry of Finance is the on-lending agency.

2. Identification of authorized on-lending agencies that bear no credit risks:

For loans to be on-lent to public non-business units or enterprises for implementation of investment projects under the State’s investment plans, based on the characteristics of these projects, the Ministry of Finance shall report to the Prime Minister for identification of an authorized on-lending agency, which may be:

a/ The Vietnam Development Bank, for investment programs and projects; or,

b/ The Vietnam Bank for Social Policies, for social policy programs and projects.

3. Identification of authorized on-lending agencies that bear credit risks:

a/ Credit institutions that satisfy the conditions specified in Clause 3, Article 35 of the Law on Public Debt Management;

b/ When proposing projects, project-managing agencies shall propose credit institutions to act as authorized on-lending agencies bearing credit risks after obtaining consent from such credit institutions;

c/ Credit institutions has the power and responsibility to give opinions to the project-managing agencies and project owners in the course of formulation and approval of pre-feasibility study reports or feasibility study reports.

d/ In the course of appraising pre-feasibility study reports or feasibility study reports, if credit institutions find the projects ineffective and refuse to participate in the projects, the project-managing agencies shall select other credit institutions eligible to act as authorized on-lending agencies bearing credit risks for the projects.

Article 23. Responsibilities and powers of authorized on-lending agencies

1. Authorized on-lending agencies shall perform the responsibilities and exercise the powers defined in Clause 1, Article 40 of the Law on Public Debt Management.

2. In addition to the provisions of Clause 1 of this Article, authorized on-lending agencies bearing credit risks have the following responsibilities and powers:

a/ To bear all credit risks and fully repay loans on schedule to the Ministry of Finance in all cases under the on-lending authorization contracts;

b/ To enjoy on-lending management charges at the rate specified in Article 10 of this Decree and all on-lending risk provisions;

c/ To decide on collaterals mortgaged by borrowers;

d/ To decide on requests (if any) made by borrowers for ahead-of-schedule loan repayment; to decide on the restructuring of loans in case borrowers meet with difficulties in loan repayment in accordance with law.

Article 24. On-lending appraisal agencies

1. The Ministry of Finance shall appraise conditions for provincial-level People’s Committees to borrow on-lent loans.

2. The Ministry of Finance may permit authorized on-lending agencies to appraise conditions for enterprises or public non-business units to borrow on-lent loans.

Article 25. Contents of on-lending appraisal

1. The appraisal of conditions for provincial-level People’s Committees to borrow on-lent loans must comply with Clause 1, Article 38 of the Law on Public Debt Management, which covers assessing the satisfaction of the conditions for borrowing on-lent loans specified in Clause 1, Article 36 of the Law on Public Debt Management.

2. The appraisal of conditions for public non-business units or enterprises to borrow on-lent loans must comply with Clause 2, Article 38 of the Law on Public Debt Management, which covers assessing:

a/ The legal person status and satisfaction of the conditions for borrowing on-lent loans specified in Article 36 of the Law on Public Debt Management;

b/ The borrower’s financial capacity and debts;

c/ The feasibility of loan use and repayment plan and loan security plan;

d/ Risk levels and feasibility of risk prevention and management measures in the borrower’s loan repayment plan.

Article 26. Process of appraisal for on-lending

1. After a project’s investment project (or feasibility study report) is approved, a borrower’s competent representative shall send a written request to the appraisal agency and concurrently to the Ministry of Finance for appraisal for on-lending, together with a dossier for appraisal prescribed in Article 27 of this Decree. When approving an investment project using on-lent ODA loans or concessional loans, the investment decider shall ensure that the loan repayment plan is grounded and feasible.

2. In case the Ministry of Finance is the on-lending agency, within 30 days after receiving a complete and valid dossier, it shall report the on-lending to the Prime Minister.

3. In case the Ministry of Finance authorizes an on-lending agency, within 30 days after receiving a complete and valid dossier, the agency in charge of appraisal for on-lending shall send an appraisal report to the Ministry of Finance. Within 15 working days after receiving a complete and valid dossier, based on the appraisal report, the Ministry of Finance shall report the appraisal result to the Prime Minister.

4. In case the conditions for borrowing on-lent loans are fully satisfied, the Ministry of Finance shall report the on-lending to the Prime Minister for approval; otherwise, it shall propose the Prime Minister not to endorse the foreign loan.

5. Based on the Prime Minister’s decision approving the on-lending, the Ministry of Finance shall carry out negotiations and sign a loan agreement under the current regulations on management of ODA loans and concessional loans.

6. Agencies in charge of appraisal for on-lending shall take responsibility for appraisal results. Borrowers shall take responsibility for documents and figures in their dossiers for appraisal.

Article 27. Dossiers for appraisal

1. A dossier for appraisal of a local budget’s loan repayment capacity must comprise:

a/ A written permission issued by the provincial-level People’s Council or its standing body for raising funds or contributing funds to a public-private partnership project under the plan on borrowing of the Government’s foreign loans, and funding sources for loan repayment;

b/ The decision approving investment policy; investment decision and investment project’s document (or feasibility study report) approved by a competent authority, which specifies the plan on the use of on-lent loans;

c/ A report on the locality’s loan borrowing and repayment at the time of request for borrowing on-lent loans, including details of all loans borrowed and their outstanding amounts; a report on the local budget’s outstanding loan amount in the previous year and estimated outstanding loan amount of the current year, and the ratio of repaid on-lent loans to budget revenues enjoyed by the locality of the last 3 years;

d/ The local budget’s annual estimate decided by the provincial-level People’s Council; the loan repayment plan with detailed explanations about the plan and funding sources for loan repayment, including funds recovered from the investment project (if any), funds from the local budget, and other lawful funding sources approved by a competent authority;

dd/ Other relevant documents (if any) proving the locality’s loan repayment capacity.

2. A dossier for appraisal for an enterprise or a public non-business unit must comprise:

a/ The decision approving the investment policy;

b/ The investment project (or feasibility study report) approved by a competent authority, together with the investment approval decision;

c/ A plan on loan use and repayment; a plan on arrangement of equity (for enterprises), or counterpart funds; a loan security plan and its relevant papers; a plan on management and realization of collaterals; and documents explaining the project’s revenues and expenditures approved by the investment decider;

d/ Audited financial statements of the last 3 years by the time of request for appraisal; and the borrower’s report on loan borrowing and repayment and outstanding loan amount.

Article 28. Signing of on-lending contracts or on-lending authorization contracts

1. After a foreign loan agreement is signed, based on the Prime Minister’s approval of the on-lending of ODA loans or concessional loans, within 30 working days, the Ministry of Finance shall sign a contract:

a/ To on-lend loans to provincial-level People’s Committees, made according to the form in Appendix I to this Decree; or,

b/ To authorize an on-lending agency bearing no credit risks, made according to the form in Appendix II to this Decree; or,

c/ To authorize an on-lending agency bearing credit risks, made according to the form in Appendix III to this Decree.

2. Within 30 working days after signing an on-lending authorization contract, the authorized on-lending agency shall sign an on-lending contract with the borrower for on-lending management and loan recovery.

 

Chapter III

ON-LENDING MANAGEMENT

Article 29. Use management of on-lent loans

1. Borrowers shall use on-lent loans properly and effectively under the competent authorities’ decisions approving investment policy or investment decisions, approved project documents, or signed on-lending contracts.

2. Authorized on-lending agencies shall inspect the use of on-lent loans by borrowers through examining on-lent loan disbursement dossiers, unless the disbursed loans have been controlled by the State Treasury. Borrowers shall provide valid and authenticated dossiers to authorized on-lending agencies. When necessary, authorized on-lending agencies may request borrowers to report on the use of on-lent loans and prove that the loans are used for proper purposes.

3. Based on disbursement notices issued by foreign lenders and notices issued by the Ministry of Finance, on-lending agencies or authorized on-lending agencies shall carry out debt acknowledgement procedures and quarterly collate debt figures with borrowers.

4. Borrowers shall take measures to manage on-lent loans and buy insurance for credit and exchange rate risks in accordance with law in order to minimize such risks.

Article 30. Loan recovery management

1. Borrowers shall fully pay on-lent loans on schedule under on-lending contracts to the Ministry of Finance (for loans on-lent to provincial-level People’s Committees) or to authorized on-lending agencies for the latter to fully refund the recovered loans on schedule to the Accumulation Fund for Debt Payment.

2. In case an authorized on-lending agency bears credit risks, it shall urge and recover loans for fully repaying them on schedule to the Ministry of Finance under the on-lending authorization contract in all cases.

3. Quarterly, the authorized on-lending agency shall collate information about the on-lent loans, including the amount withdrawn, amount paid, and outstanding loan amount, with the borrower.

4. Within 60 days from the end of a year, the authorized on-lending agency shall summarize information about all on-lent loans under its management, report and collate them with the Ministry of Finance, including the total number of projects using on-lent loans, total amount disbursed, total amount paid, and total  outstanding loan amount, which are detailed by project and on-lent loan.

Article 31. Management of collaterals

1. Within 30 days from the date of signing a contract on on-lending of loans to a borrower being a public non-business unit or an enterprise, the borrower and authorized on-lending agency shall sign a loan security contract.

2. Within 30 days from the date of signing a loan security contract, the borrower shall register collateral security measures for the on-lent loan in accordance with the law on secured transactions.

3. The parties related to the collaterals shall observe the regulations on collaterals. Collaterals shall be managed and used for proper purposes. The transfer of collaterals shall be approved by the Prime Minister in case the authorized on-lending agency bears no credit risks, or by the authorized on-lending agency in case this agency bears credit risks.

4. A loan security contract will be terminated only when the borrower has fulfilled all liabilities under the on-lending contract.

5. The borrower shall buy insurance for risks under law for collaterals currently mortgaged to the authorized on-lending agency until there is no longer any outstanding loan amount.

6. The authorized on-lending agency shall manage and supervise the use of collaterals; and may hire an independent organization to evaluate, inspect and supervise collaterals in case such a collateral is coerced under law, and realize collaterals. The borrower shall pay expenses for these jobs.

Article 32. Reporting on on-lending activities and financial status of borrowers

1. Borrowers being provincial-level People’s Committees shall report to the Ministry of Finance; borrowers being public non-business units or enterprises shall report to authorized on-lending agencies no later than January 31 and no later than July 31 every year, on the following:

a/ Fund withdrawal, repayment and outstanding on-lent loan amount;

b/ Changes in collaterals;

c/ Their financial status and actual debts, including outstanding and overdue debts (if any) to any creditor;

d/ Implementation, operation and exploitation of the investment projects, management and use of assets of the investment projects, and assets formed from loans.

2. Authorized on-lending agencies shall report on the issues specified in Clause 1 of this Article to the Ministry of Finance no later than February 28 and no later than August 31 every year or right after the occurrence of unexpected matters affecting the loan repayment capacity of each project using on-lent loans, and to the borrowers.

3. Annually, the Ministry of Finance shall include on-lending activities in its general report on public debts to be submitted to the Government.

4. The Ministry of Finance shall issue forms of reports.

Article 33. Inspection and supervision

1. On-lending activities prescribed in this Decree shall be inspected by competent state agencies in accordance with law.

2. Authorized on-lending agencies shall manage and supervise on-lent loans, borrowers, loan borrowing and repayment, changes in collaterals, and operation of works invested with on-lent loans, and inspect borrowers on a periodical or unscheduled basis and report inspection results to the Ministry of Finance.

3. The Ministry of Finance shall supervise on-lending activities through authorized on-lending agencies, and conduct periodical or unscheduled inspections of authorized on-lending agencies and borrowers.

4. In the course of inspection and supervision, if detecting that borrowers fail to fulfill the commitments and obligations stated in the on-lending contracts, authorized on-lending agencies or the Ministry of Finance shall handle violations according to their or its competence. If the case falls beyond its competence, the Ministry of Finance shall report it to the Prime Minister for handling.

 

Chapter IV

CLASSIFICATION OF LOANS, MANAGEMENT AND HANDLING OF ON-LENDING RISKS

Article 34. Classification of loans

1. Loans on-lent to public non-business units or enterprises shall be periodically classified by authorized on-lending agencies and included in the loan portfolio under the program on public debt-related risk management, based on the borrowers’ fulfillment of liabilities, specifically as follows:

a/ Group-1 loans: loans being repaid fully and on schedule;

b/ Group-2 loans: loans overdue for 1 repayment term;

c/ Group-3 loans: loans overdue for between 2 repayment terms and 3 repayment terms;

d/ Group-4 loans: loans overdue for 4 or more repayment terms;

dd/ Group-5 loans: loans impossible to be repaid.

2. Annually, authorized on-lending agencies shall report to the Ministry of Finance on the classification of on-lent loans under their management for the latter to summarize them and report on the classification of loans in the on-lent loan portfolio to the Prime Minister.

3. Loans on-lent to provincial-level People’s Committees are not required to be classified.

4. The classification of on-lent loans whereby on-lending agencies bear credit risks must comply with the State Bank of Vietnam’s regulations on classification of credit assets, levels and methods of setting up risk provisions, and the use of provisions for handling risks in the operation of credit institutions.

Article 35. Risk management

1. Based on loan classification, the Ministry of Finance shall apply risk provision operations as follows:

a/ For loans overdue for 1 or more than 1 repayment term: The borrower shall report on its revenues and expenditures to the authorized on-lending agency, and commit to arrange sufficient funds for loan repayment; no new loan will be considered in this case;

b/ For loans overdue for 2 or more repayment terms: The borrower shall maintain the balance on its account prescribed in Clause 3, Article 17 of this Decree at a level at least equal to the amount of 2 subsequent repayment terms, at least 15 days before the starting date of the nearest subsequent repayment term;

c/ For loans overdue for 3 or more repayment terms: The on-lending agency may request the banks where the borrower opens its accounts to deduct money from these accounts for loan repayment as authorized by the borrower under Clause 4, Article 17 of this Decree;

d/ For unrepayable loans: The borrower shall comply with handling measures approved by the Prime Minister, including realization of collaterals for loan repayment.

2. The handling of risks must comply with law and minimize damage to the State and bind responsibilities of on-lending agencies and borrowers in the lending, repayment and handling of loans.

Article 36. Extension of loan repayment terms

1. In case a borrower meets with temporary difficulties due to an objective cause or a force majeure event such as natural disaster, enemy sabotage, policy or economic situation change, adversely affecting the investment projects, which cannot be implemented on schedule or generate revenues as expected for loan repayment, and is thus unable to repay the loans on schedule even after having applied remedies:

a/ The Minister of Finance may consider and decide on extension of the loan repayment term and grace period for the on-lent loan, which must not exceed the loan repayment term and grade period of the foreign loan;

b/ The Prime Minister may decide to extend the loan repayment term and grace period for the on-lent loan which exceed the loan repayment term and grade period of the foreign loan.

2. The extension of the loan repayment term and grace period for an on-lent loan shall be considered and decided based on the request of the borrower or its managing agency, and the report appraising the loan repayment capacity under the plan on extension of the loan repayment term and grace period made by the authorized on-lending agency.

3. To have its loan repayment capacity appraised under the plan on extension of the loan repayment term and grace period, the borrower shall send to the authorized on-lending agency the following:

a/ A plan on extension of the loan repayment term, stating the funding sources for loan repayment;

b/ Its audited financial statements of the last 3 years;

c/ A document showing opinions of the borrower-managing agency and related agencies on the causes of financial difficulties making the borrower  unable to repay the loan.

4. Credit institutions may decide on the extension of the loan repayment terms for on-lent loans whereby on-lending agencies bear credit risks. In this case, credit institutions bearing risks shall refund the on-lent loans to the Ministry of Finance under the on-lending authorization contracts.

Article 37. Charge-off of loans

1. The charge-off of loans on-lent to public non-business units or enterprises shall be considered in case borrowers meet with prolonged difficulties due to objective causes or force majeure events such as natural disaster, enemy sabotage, policy or economic situation change, adversely affecting the projects, which make the borrowers suffer losses for 3 or more consecutive years by the time of request for loan handling; make the borrowers  unable to repay debts to other creditors or meet with difficulties in ensuring working capital for maintaining their operation and performing obligations toward their employees; and make the borrowers unable to repay the debts even after having applied remedies, provided that the borrowers have a financial restructuring plan approved by authorities competent to approve investment policy.

2. The charge-off period must not exceed 5 years.

3. During the charge-off period, borrowers will be exempted from interest and charges arising from charged-off liabilities.

4. To have its loan repayment capacity appraised under the charge-off plan, the borrower shall send to the authorized on-lending agency the following:

a/ A plan on loan repayment after the expiration of the charge-off period, and funding sources for loan repayment;

b/ The borrower’s audited financial statements of the last 3 years;

c/ A document showing opinions of the borrower-managing agency and related agencies on the causes of difficulties which make the borrower suffer losses and unable to repay the loans;

d/ The borrower’s financial restructuring plan approved by the authority competent to approve investment policy.

5. Based on the report appraising the charge-off plan and recommendations of the authorized on-lending agency, the Ministry of Finance shall propose the charge-off of on-lent loans to the Prime Minister for consideration and decision.

6. Credit institutions may decide on the charge-off of on-lent loans whereby on-lending agencies bear credit risks. In this case, credit institutions bearing risks shall refund the on-lent loans to the Ministry of Finance under the on-lending authorization contracts.

Article 38. Partial write-off of loans

1. The partial write-off of liabilities, including interest, late-payment interest, and part of principals of on-lent loans, shall be considered in case borrowers being public non-business units or enterprises meet with prolonged difficulties due to objective causes or force majeure events due to natural disaster, enemy sabotage, policy or economic situation change, adversely affecting the projects, which make the borrowers suffer losses for 5 or more consecutive years by the time of request for loan handling; make the borrowers  unable to repay debts to other creditors or meet with difficulties in ensuring working capital for maintaining their operation and performing obligations toward their employees; and make the borrowers unable to repay debts even after having applied remedies, provided that the loan restructuring is approved in principle by at least 1 creditor and that the borrowers have a financial restructuring plan approved by authorities competent to approve investment policy.

2. To have its loan repayment capacity appraised under the plan on write-off of interest, late-payment interest and part of principals of on-lent loans, the borrower shall send to the authorized on-lending agency the following:

a/ A plan on loan repayment after the expiration of the charge-off period, and funding sources for loan repayment;

b/ The borrower’s audited financial statements of the last 5 years;

c/ A document showing opinions of the borrower-managing agency and related agencies on the causes of difficulties which make the borrower suffer losses and unable to repay the loans;

d/ In-principle approval of at least 1 creditor of the restructuring of other loans related to the borrower;

dd/ The borrower’s financial restructuring plan for the project using on-lent loans, approved by the authority competent to approve investment policy.

3. Based on the report appraising the plan on partial write-off of loans and recommendations of the authorized on-lending agency, the Ministry of Finance shall propose the partial write-off of on-lent loans to the Prime Minister for consideration and decision.

4. Credit institutions may decide on the write-off of on-lent loans whereby on-lending agencies bear credit risks. In this case, credit institutions bearing risks shall refund the on-lent loans to the Ministry of Finance under the on-lending authorization contracts.

Article 39. Write-off of whole loans for borrowers being enterprises

1. In case borrowers being enterprises are dissolved or go bankrupt under decisions of competent agencies, the recovery of loans must comply with the law on dissolution and bankruptcy of enterprises.

2. For uncollectible loans (if any) after implementing the provisions of Clause 1 of this Article, the Ministry of Finance shall report their write-off to the Prime Minister for decision.

Article 40. Funding sources for loan handling

1. Borrowers shall repay loans to the Ministry of Finance into the Accumulation Fund for Debt Payment as funding sources for repayment of foreign loans. The Ministry of Finance shall repay loans under foreign loan agreements.

2. In case of implementing measures of extension of loan repayment terms, charge-off or write-off of loans under decisions of competent authorities, the Ministry of Finance may use the Accumulation Fund for Debt Payment for handling.

 

Chapter V

IMPLEMENTATION PROVISIONS

Article 41. Effect

1. This Decree takes effect on July 1, 2018. This Decree replaces the Government’s Decree No. 78/2010/ND-CP of July 14, 2010, on the on-lending of the Government’s foreign loans, and Decree No. 52/2017/ND-CP of April 28, 2017, on the on-lending of the Government’s foreign loans to provincial-level People’s Committees.

2. The financial mechanism and conditions on on-lending for programs and projects already decided by the Prime Minister and authorization contracts and on-lending contracts entered into before the effective date of this Decree will continue to apply. For specific lending conditions which are not decided or modified by the Prime Minister, the Ministry of Finance shall report them to the Prime Minister before conducting negotiations.

Article 42. Implementation responsibility

Ministers, heads of ministerial-level agencies, heads of government-attached agencies, chairpersons of provincial-level People’s Committees, and related enterprises, organizations and individuals shall implement this Decree.-

On behalf of the Government
Prime Minister
NGUYEN XUAN PHUC

* The appendices to this Decree are not translated.-