Circular 02/2023/TT-NHNN debt rescheduling and maintaining classified loan groups to support clients

CIRCULAR

On credit institutions and foreign bank branches carrying out debt rescheduling and maintaining loan categories in order to help their clients facing difficulties^[1]

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

Pursuant to the June 16, 2010 Law on Credit Institutions; and the November 20, 2017 Law Amending and Supplementing a Number of Articles of the Law on Credit Institutions;

Pursuant to the Government’s Decree No. 102/2022/ND-CP of December 12, 2022, defining the functions, tasks, powers and organizational structure of the State Bank of Vietnam;

Pursuant to the Government’s Resolution No. 50/NQ-CP of April 8, 2023, on the conference between the Government and local authorities and the Government’s March 2023 regular meeting, and the Government’s Resolution No. 59/NQ-CP of April 23, 2023, on solutions to remove difficulties for borrowers of consumer loans;

After reaching agreement with the Ministry of Finance;

At the proposal of the Director of the Department of Credit for Economic Sectors;

The Governor of the State Bank of Vietnam (below referred to as the State Bank) promulgates the Circular on credit institutions and foreign bank branches carrying out debt rescheduling and maintaining loan categories in order to help their clients facing difficulties.

Chapter I

GENERAL PROVISIONS

Article 1. Scope of regulation

This Circular regulates credit institutions and foreign bank branches carrying out debt rescheduling and maintaining loan categories in order to help clients that face difficulties in production and business activities and clients that face difficulties in repaying their consumer loans.

Article 2. Subjects of application

1. Credit institutions (except policy banks) and foreign bank branches.

2. Clients of credit institutions and foreign bank branches (except clients being credit institutions or foreign bank branches).

3. Other organizations and individuals involved in debt rescheduling and maintenance of loan categories in order to help clients facing difficulties.

Article 3. Application of relevant legal documents

Debt rescheduling and maintenance of loan categories and setting aside of risk provisions in order to help clients that face difficulties in production and business activities and clients that face difficulties in repaying their consumer loans must comply with this Circular. Other contents related to debt rescheduling, loan classification, and setting aside and use of provisions for handling risks not mentioned in this Circular must comply with other relevant legal documents.

Chapter II

SPECIFIC PROVISIONS

Article 4. Debt rescheduling

A credit institution or foreign bank branch may consider deciding on debt rescheduling for the balance of principals and/or interests of a loan (including also loans regulated by the Government’s Decree No. 55/2015/ND-CP of June 9, 2015, on credit policies to serve agricultural and rural development (which was revised)), based on requests of clients and its financial capacity, provided that the following conditions are satisfied:

1. Loan principals arise before the effective date of this Circular and from lending and financial leasing activities.

2. The obligation to repay loan principals and/or interests arises in the period from the effective date of this Circular through June 30, 2024.

3. The balance of the rescheduled debt is not yet due or becomes overdue for up to 10 (ten) days from the due date under the signed contract or agreement.

4. It is evaluated by the credit institution or foreign bank branch that the concerned client is unable to make scheduled payment of its/his/her loan principals and/or interests as committed in the signed contract or agreement due to reduction of revenues or incomes compared to those stated in the plan for payment of loan principals and/or interests under the contract or agreement.

5. It is evaluated by the credit institution or foreign bank branch that the concerned client is able to fully pay loan principals and/or interests within the rescheduled payment term.

6. The credit institution or foreign bank branch refuses rescheduling for debts in violation of law.

7. The rescheduled payment terms (including also cases of loan extension) shall be determined depending on a client’s difficulties and must not exceed 12 months from the due date of the balance of the rescheduled debt.

8. The debt rescheduling for clients under this Circular shall be applied from the effective date of this Circular through June 30, 2024.

Article 5. Maintenance of loan categories and classification of loans

1. Credit institutions and foreign bank branches may permit maintenance of loan categories for the loans with rescheduled payment terms of principals and/or interests (below referred to as rescheduled debts) in accordance with this Circular like the loans classified in accordance with the State Bank Governor’s regulations on classification of assets, levels and methods of setting aside risk provisions, and use of provisions for handling risks in the operations of credit institutions and foreign bank branches at the latest time before debt rescheduling under this Circular.

2. After the debt rescheduling and maintenance of loan categories under Clause 1 of this Article, if the loans are not yet due compared to the rescheduled payment terms, credit institutions and foreign bank branches are not required to apply the principle of adjustment and reclassification of such loans into higher-risk loans under the State Bank Governor’s regulations on classification of assets, levels and methods of setting aside risk provisions, and use of provisions for handling risks in the operations of credit institutions and foreign bank branches.

3. After the debt rescheduling and maintenance of loan categories under Clause 1 of this Article, if the loans become overdue compared to the rescheduled payment terms but are not eligible for further rescheduling under this Circular by credit institutions and foreign bank branches, the credit institutions and foreign bank branches are required to classify loans under the State Bank Governor’s regulations on classification of assets, levels and methods of setting aside risk provisions, and use of provisions for handling risks in the operations of credit institutions and foreign bank branches.

4. For receivable interests of the loans that are rescheduled and maintained as current loans (category-1 loans) under this Circular, from the date of rescheduling, credit institutions and foreign bank branches are not required to account such interests as incomes (estimated incomes) but shall monitor such interests off balance sheet to urge the collection thereof; and account the received interests as incomes in accordance with regulations on financial regime applicable to credit institutions and foreign bank branches.

Article 6. Setting aside of risk provisions

1. Credit institutions and foreign bank branches shall set aside specific risk provisions for clients that have the balance of rescheduled loans in accordance with this Circular as follows:

a/ To set aside specific risk provisions for the whole debit balance of clients based on the loan classification results specified in Article 5 of this Circular for the loans without change in loan categories and the loan classification results for the remaining debit balance of clients in accordance with the State Bank Governor’s regulations on classification of assets, levels and methods of setting aside risk provisions, and use of provisions for handling risks in the operations of credit institutions and foreign bank branches, ensuring compliance with the State Bank Governor’s regulations on setting aside of risk provisions in the operations of credit institutions and foreign bank branches.

b/ To determine the specific amount of risk provisions to be set aside for the whole debit balance of clients based on the loan classification results in accordance with the State Bank Governor’s regulations on classification of assets, levels and methods of setting aside risk provisions, and use of provisions for handling risks in the operations of credit institutions and foreign bank branches (not applying regulations on maintenance of loan categories specified in Article 5 of this Circular).

c/ To determine the specific amount of risk provisions to be additionally set aside according to the following formula:

Specific amount of risk provisions to be additionally set aside = A - B

Of which:

- A: Specific amount of risk provisions to be set aside under Point b, Clause 1 of this Article.

- B: Specific amount of risk provisions already set aside under Point a, Clause 1 of this Article.

d/ In case the specific amount of risk provisions to be additionally set aside which is determined under Point c, Clause 1 of this Article is positive, credit institutions and foreign bank branches shall additionally set aside risk provisions as follows:

(i) By December 31, 2023: Paying at least 50% of the specific amount of risk provisions to be additionally set aside;

(ii) By December 31, 2024: Paying the remainder of the specific amount of risk provisions to be additionally set aside.

2. Credit institutions and foreign bank branches shall set aside risk provisions for the whole debit balance of clients based on the loan classification results determined under Point b, Clause 1 of this Article.

Article 7. Responsibilities of credit institutions and foreign bank branches

1. To take responsibility for their decisions on debt rescheduling and maintenance of loan categories under this Circular, and conduct internal inspection and control, ensuring strict supervision, safety, and prevention and stoppage of the abuse of debt rescheduling or maintenance of loan categories for self-seeking purposes.

2. To issue internal regulations on debt rescheduling and maintenance of loan categories in accordance with this Circular for uniform implementation in the entire banking system, which must have the following contents:

a/ Criteria for determining the debit balance of debts eligible for rescheduling and maintenance of loan categories under this Circular;

b/ Order, procedures, decentralization of powers, and assignment of tasks and responsibilities to each person or division for carrying out debt rescheduling and maintenance of loan categories, adhering to the principle that the person or division that decides on the debt rescheduling and maintenance of loan categories is not the person or division that approves the credit extension, except cases in which the credit extension is approved by the Board of Directors, Members’ Council, Chief Executive Officer or parent bank (for foreign bank branches). In case the credit extension or debt rescheduling is approved by a council, the chairperson of the council for approval of debt rescheduling must not be the chairperson of the council for approval of credit extension and at least 2/3 (two-thirds) of members of the council for approval of debt rescheduling must not be members of the council for approval of credit extension;

c/ Frequency of review and evaluation of solvency of clients after debt rescheduling and maintenance of loan categories in accordance with law; monitoring, inspection, control and supervision of debt rescheduling and maintenance of loan categories.

3. Credit institutions and foreign bank branches shall send 1 (one) copy of internal regulations specified in Clause 2 of this Article to the State Bank (the Banking Supervision Agency and the State Bank’s provincial-level branches in localities where their head offices are located) in accordance with law.

4. Within the first 10 (ten) days of every month, credit institutions (except people’s credit funds) and foreign bank branch shall send reports on the situation of debt rescheduling and maintenance of loan categories until the last day of the preceding month, made according to the forms provided in Appendices No. 01 and No. 02 to this Circular, to the State Bank (the Department of Credit for Economic Sectors and the Banking Supervision Agency).

5. Within the first 10 (ten) days of every month, credit institutions being people’s credit funds shall send reports on the situation of debt rescheduling and maintenance of loan categories until the last day of the preceding month, made according to the forms provided in Appendices No. 01 and No. 02 to this Circular, to the State Bank’s provincial-level branches in localities where their head offices are located.

Article 8. Responsibilities of units of the State Bank

1. Responsibilities of the Department of Credit for Economic Sectors

a/ To sum up the reports specified in Clause 4, Article 7 of this Circular and at Point a, Clause 3 of this Article;

b/ To assume the prime responsibility for, and coordinate with the Monetary Policy Department, the Banking Supervision Agency and related units in, advising the State Bank Governor on addressing problems arising in the course of implementation of this Circular.

2. Responsibilities of the Banking Supervision Agency

To inspect and supervise credit institutions and foreign bank branches in implementing this Circular within the ambit of its functions and tasks.

3. Responsibilities of the State Bank’s provincial-level branches

a/ Within the first 15 (fifteen) days of every month, to sum up reports of people’s credit funds in their localities under Clause 5, Article 7 of this Circular and send them to the Department of Credit for Economic Sectors for summing up;

b/ To inspect and supervise credit institutions and foreign bank branches in implementing this Circular within the ambit of their functions and tasks.

Chapter III

IMPLEMENTATION PROVISIONS

Article 9. Effect

This Circular takes effect on April 24, 2023.

Article 10. Organization of implementation

The Chief of the Office, Director of the Department of Credit for Economic Sectors, Chief of the Banking Supervision Agency, and heads of the units of the State Bank, directors of the State Bank’s provincial-level branches, chairpersons of Boards of Directors or Members’ Councils, and Chief Executive Officers of credit institutions and foreign bank branches shall organize the implementation of this Circular.-

For the State Bank Governor
Deputy Governor
DAO MINH TU

* The Appendices to this Circular are not translated.