Circular 06/2023/TT-NHNN provision of loans by credit institutions, foreign bank branches to clients

CIRCULAR

Amending and supplementing a number of articles of Circular No. 39/2016/TT-NHNN of December 30, 2016, of the Governor of the State Bank of Vietnam, providing for the provision of loans by credit institutions and foreign bank branches to clients^[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;

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

The Governor of the State Bank of Vietnam promulgates the Circular amending and supplementing a number of articles of Circular No. 39/2016/TT-NHNN of December 30, 2016, of the Governor of the State Bank of Vietnam, providing for the provision of loans by credit institutions and foreign bank branches to clients (below referred to as Circular No. 39/2016/TT-NHNN).

Article 1. To amend and supplement a number of articles of Circular No. 39/2016/TT-NHNN

1. To amend and supplement Point c, Clause 6 of, and add Clause 12 to, Article 2 as follows:

a/ To amend and supplement Point c, Clause 6 as follows:

“c/ Business plans/projects, or plans/projects serving borrowers’ consumption needs, such as purchase, construction or renovation of houses; or acquisition of land use rights for construction of houses.”.

b/ To add Clause 12 as follows:

“12. Provision of loans for offsetting financial assets means the provision of a loan by a credit institution to a client to offset expenses paid by the client’s own funds or by loans borrowed from individuals or organizations (other than credit institutions) for the client to implement a business plan/project or a plan/project serving the client’s consumption needs.”.

2. To amend and supplement Article 8 as follows:

“Article 8. Loan demands ineligible to be satisfied

A credit institution may not provide loans to clients for:

1. Carrying out business investment activities in sectors and trades in which business investment is banned under the Law on Investment.

2. Paying expenses for or financing business investment activities in sectors and trades in which business investment is banned under the Law on Investment and other transactions or acts banned by law.

3. Buying and using goods and services in sectors and trades in which business investment is banned under the Law on Investment.

4. Buying gold bullions.

5. Repaying the amounts of credit extended by the lending credit institutions, except cases in which loans are provided to clients for paying the loan interests arising in the course of construction of works and the loan interests are included in the total construction investment amounts approved by competent authorities in accordance with law.

6. Repaying foreign loans (excluding foreign loans provided in the form of goods purchase/sale on deferred payment), and the amounts of credit extended by other credit institutions, except cases in which a new loan is provided to a client for premature repayment of the existing loan when the following conditions are fully satisfied:

a/ The term of the new loan does not exceed the remaining term of the existing loan;

b/ The existing loan has not yet been rescheduled.

7. Depositing money.

8. Making payment for capital contribution, purchasing or acquiring capital contributions of limited liability companies or partnerships; or contributing capital, purchasing or acquiring shares of joint-stock companies not yet listed on the securities market or not yet registered for trading on the Upcom trading system.

9. Making payment for capital contribution under a capital contribution contract, investment cooperation contract or business cooperation contract for the implementation of an investment project ineligible for being put into commercial operation in accordance with law at the time the credit institution decides on loan provision.

10. Offsetting financial assets, except cases in which the following conditions are fully satisfied:

a/ The client has used its own funds to pay expenses for implementation of a business project and such expenses incur for a period of less than 12 months counted by the time the credit institution decides on loan provision;

b/ Expenses for the implementation of a business project that have been paid by the client’s own funds come from the loans provided by the credit institution under the fund use plan submitted to the credit institution when the client applies for medium- or long-term loans to implement such business project.”.

3. To amend and supplement Clause 2, Article 11 as follows:

“2. The currency used for debt repayment is the currency in which the loan is provided. In case of debt repayment in another currency, the agreement between the credit institution and the client shall be implemented in accordance with relevant regulations.”.

4. To amend and supplement Clause 2, Article 13 as follows:

“2. In case a client is evaluated by a credit institution as having a transparent and sound financial status, the credit institution and the client may agree on the interest rate of the short-term loan in Vietnam dong, which must not exceed the maximum interest rate decided by the Governor of the State Bank of Vietnam in each period, so as to provide loans for:

a/ Serving agricultural and rural development under the Government’s regulations on credit policies for agricultural and rural development;

b/ Implementing export trading plans under the Commercial Law and guiding documents;

c/ Serving business activities of small- and medium-sized enterprises in accordance with the Law on Support for Small- and Medium-sized Enterprises and the Government’s regulations on support for small- and medium-sized enterprises;

d/ Developing supporting industries under the Government’s regulations on development of supporting industries;

dd/ Serving business activities of enterprises applying high technologies on the Prime Minister-approved List of high technologies prioritized for development investment and hi-tech enterprises defined under the Law on High Technologies and guiding documents.”.

5. To amend and supplement Clause 4, Article 18 as follows:

“4. A credit institution and a client may agree on the sequence of recovery of the loan principal and interest. For an overdue debt, the credit institution shall recover the loan principal first and the loan interest later. For a loan with one or several overdue repayment term(s), the credit institution shall recover it according to the following sequence: overdue loan principal, interest on unpaid overdue loan principal, due principal, and interest on the loan principal not paid by the due date.”.

6. To amend and supplement Clause 1, and Points a, b, c, e and g, Clause 2, Article 22 as follows:

a/ To amend and supplement Clause 1 as follows:

“1. Pursuant to the Law on Credit Institutions, this Circular and relevant regulations, a credit institution shall issue its internal regulations on loan provision, including regulations on online lending (if any), and management of loans in conformity with the characteristics of its business activities (below referred to as internal regulations on loan provision).”.

b/ To amend and supplement Point a, Clause 2 as follows:

“a/ Conditions for provision of loans, including specific criteria for determining whether the borrower’s demand for loans is for use for lawful purposes; and whether the borrower has a feasible loan use plan and financial capacity to repay debts; loan demands ineligible to be satisfied; mode of loan provision; loan interest rate and interest calculation method; criteria for determining whether a client has a transparent and sound financial status to be eligible to borrow loans at the interest rates specified in Clause 2, Article 13 of this Circular; dossier for loan borrowing and documents and data to be sent by the client to the credit institution in conformity with characteristics and types of loans and category of clients; debt recovery; conditions, process and procedures for debt rescheduling; conversion of loans into overdue debts; conditions for provision of loans without applying security interests and competence to decide on provision of loans without applying security interests.”.

c/ To amend and supplement Point b, Clause 2 as follows:

b/ The process of appraisal and approval of clients’ dossiers for loan borrowing and decision on, loan provision, specifying:

(i) Maximum time limits for appraisal of a client’s dossier for loan borrowing and decision on loan provision; decentralization, authorization and responsibilities of each person and division in the appraisal and approval of a client’s dossier for loan borrowing and decision on loan provision, including regulations on online lending specified in Article 32dd of this Circular (if any); and other jobs involved in the process of appraisal and approval of a client’s dossier for loan borrowing and decision on loan provision;

(ii) Cases in which loans are provided for making payment for capital contributions under capital contribution contracts, investment cooperation contracts or business cooperation contracts for implementation of projects;

(iii) In case of provision of loans for payment to secure obligation performance, it is required to take measures for freezing the amounts of loans disbursed by the lending credit institution in accordance with law and loan agreements of the parties until the security obligation is terminated.”.

d/ To amend and supplement Point c, Clause 2 as follows:

“c/ The process of inspection and supervision of clients in the borrowing and use of loans and repayment of debts, specifying:

 (i) Decentralization, authorization and responsibilities of each person and division in the inspection and supervision of clients in the borrowing and use of loans and repayment of debts;

(ii) In case of provision of loans for making payment for capital contributions under capital contribution contracts, investment cooperation contracts or business cooperation contracts for implementation of projects, it is required to take measures for inspecting, supervising and evaluating clients’ financial status, funding sources for debt repayment, ensuring the full recovery of loan principal and interest by the due date as agreed upon, and controlling the use of loans;

(iii) In case of provision of loans for making payment to secure obligation performance, ensuring the recovery of loans in case the parties fail to properly fulfill the secured obligations as agreed upon;”.

dd/ To amend and supplement Point e, Clause 2 as follows:

“e/ The identification of risks that are likely to arise during the lending process; the process of monitoring, evaluation and control of risks; plans for risk handling during the lending process (including online lending);”.

e/ To amend and supplement Point g, Clause 2 as follows:

“g/ The control of provision of loans to be used for repaying debts owed to the credit institution and repaying foreign debts in order to prevent false reporting on credit quality; the control of loan provision by the mode of rollover and revolving loans in order to manage clients’ cash flow and ensure the full recovery of loan principal and interest by the due date as agreed upon, correctly reflecting credit quality; the control of provision of loans for securities trading investment; provision of loans to purchase and trade in real estate; provision of loans for investment projects in the form of public-private partnership; provision of consumer loans with great value as evaluated by credit institutions; and online lending.”.

 7. To amend and supplement Point b, Clause 4, Article 23 as follows:

“b/ Provide sufficient information on the model contract and general transaction conditions to clients prior to the conclusion of loan agreements and obtain clients’ confirmation that they has been provided with sufficient information by credit institutions.”.

8. To amend and supplement Clause 2, Article 24 as follows:

“2. A credit institution has the right and obligation to inspect and supervise clients in using loans and repaying debts in accordance with law and the internal process specified at Point c, Clause 2, Article 22 of this Circular.”.

9. To amend and supplement Clause 2 of, and add Clause 5 to, Article 26 as follows:

a/ To amend and supplement Clause 2 as follows:

“2. Use payment instruments to disburse loans under the State Bank of Vietnam’s regulations on the modes to disburse loans of credit institutions to clients.”.

b/ To add Clause 5 as follows:

“5. In case of provision of loans for payment to secure obligation performance, freeze the amounts of loans disbursed by the lending credit institution in accordance with law and loan agreements of the parties until the security obligation is terminated.”.

10. To amend and supplement Clauses 1, 4 and 5, Article 27 as follows:

a/ To amend and supplement Clause 1 as follows:

“Provision of a single loan: For each time of loan provision, the credit institution and the client shall perform procedures for provision of loans to the client and sign a loan agreement.”.

b/ To amend and supplement Clause 4 as follows:

“4. “Provision of loans based on line of credit: The credit institution shall determine, and agree with the client on, the maximum line of credit to be maintained within a certain period. At least once a year, the credit institution shall re-determine the maximum line of credit and the period of maintenance thereof.”.

c/ To amend and supplement Clause 5 as follows:

“5. Provision of loans based on standby line of credit: The credit institution shall commit to provide loans to the client within the agreed standby line of credit (beyond the agreed line of credit). The credit institution and the client shall agree on the validity period of the standby line of credit which must not exceed 1 (one) year.”.

11. To add Section 3 to Chapter II as follows:

“Section 3

ONLINE LENDING

Article 32a. Principles of online lending

1. Credit institutions shall provide online loans as suitable to their business operation conditions and loan characteristics, ensuring security, safety, protection of data messages and information confidentiality in accordance with the laws on money laundering prevention and combat and e-transactions, the State Bank of Vietnam’s guidance on risk management, and relevant legal documents.

2. The information systems used for online lending must comply with regulations on assurance of safety of information systems at level 3 or higher level under the Government’s regulations on assurance of level-based safety of information systems and the State Bank of Vietnam’s regulations on security of information systems in banking operations.

3. Credit institutions shall store and preserve information and data in accordance with law, ensure their safety and confidentiality, and may make backup copies of files to ensure adequacy and integrity of records that enable assess or use when necessary or to serve the inspection, collation, settlement of trace requests, complaints and disputes and provide information at the request of competent state management agencies.

4. A credit institution shall decide by itself on measures, forms and technologies for online lending, bear arising risks (if any) and meet at least the following requirements:

a/ Having technical solutions and technologies to ensure the accuracy, confidentiality and safety in the course of collection, use and verification of information and data;

b/ Adopting measures for inspection, collation, updating and verification of information and data; and measures to prevent acts of forging, intervening or falsifying information and data;

c/ Adopting measures for monitoring, identification, measurement and control of risks; and plans for handling risks;

d/ Assigning responsibility to each individual or division involved in online lending and risk management and control.

5. Credit institutions shall consider and decide on online lending in accordance with Section 3 of this Circular. Contents not mentioned in Section 3 of this Circular must comply with relevant provisions of this Circular.

Article 32b. Identification of customers and verification of know-your-customer information

1. A credit institution shall adopt technical solutions and technologies to identify customers and verify know-your-customer information serving online lending ; and bear arising risks (if any), and must meet at least the following requirements:

a/ Ensuring the consistency of know-your-customer information and customers’ biometric data (i.e., biological factors and characteristics that are linked to a customer to be identified, difficult to be forged, and rarely match with those of another person, such as fingerprints, face, iris, voice and other biometric factors) with the corresponding biometric information and factors stated in necessary documents and data to identify a customer in accordance with the law on money laundering prevention and combat at the request of a credit institution; or with personal identification data authenticated by a competent state agency; or with citizen identity database; or national population database; or those provided by an electronic authentication service provider in accordance with the regulations on electronic identification and authentication or by another credit institution;

b/ Formulating a process of risk management, control and assessment, including measures to prevent acts of impersonating, intervening, altering or falsifying know-your-customer information during the lending process; adopting measures to check and verify know-your-customer information to confirm that customers who perform online transactions are the borrowers; and adopting technical measures to certify the identified customers’ consent to the loan agreement. The process of risk management and control shall be regularly reviewed and revised based on the updated information and data;

c/ Storing and preserving adequate and detailed know-your-customer information and customers’ biometric data; sound, images, video recordings, sound recordings; phone numbers used to make transactions; and transaction log during the lending process.

2. The identification of customers and verification of know-your-customer information specified in Clause 1 of this Article shall apply to individual customers who apply for consumer loans and establish for the first time relationship with a credit institution. For individual customers applying for consumer loans who have established the relationship with a credit institution and have undergone customer identification and know-your-customer information verification, the credit institution may decide to apply measures, forms and technologies to verify know-your-customer information serving online lending, ensuring consistency with the known customer information.

Article 32c. Loan balance

The loan balance for an individual customer who wishes to borrow consumer loans and undergoes customer identification and know-your-customer information verification under Article 32b of this Circular must not exceed VND 100,000,000 (one hundred million) at a credit institution.

Article 32d. Dossiers of application for loans

When wishing to borrow a loan, a client shall send to a credit institution documents and data proving its/his/her satisfaction of the conditions specified in Article 7 of this Circular and other documents and data required by the credit institution.

Article 32dd. Appraisal of dossiers for loan borrowing and decision on loan provision

Credit institutions shall approve online lending in adherence to the principle of assignment of responsibilities of each individual and division for building, establishing and operating information systems to serve the appraisal and decision on loan provision. In case of risks, a credit institution shall adopt a mechanism to identify each individual or division responsible for the risks, and promptly handle arising problems and risks to ensure efficiency and safety in approval of online lending.

Article 32e. Loan agreements

A loan agreement shall be made in writing; for an electronic contract, it is required to comply with the law on e-transactions, and must have at least the contents specified in Article 23 of this Circular.

Article 32g. Retention of dossiers of loan provision

1. A credit institution shall make a dossier of loan provision in the form of data message in accordance with the laws on archive and e-transactions and relevant laws. Such dossier must comprise:

a/ The loan agreement;

b/ Reports on the client’s actual financial status;

c/ The decision on loan provision, which bears the electronic signature of a competent person; in case of a collective decision, a minutes stating the approval of the decision is required;

d/ Know-your-customer information and data (if any); information and data arising in the course of using the loan which are related to the loan agreement as guided by the credit institution.

2. Credit institutions shall retain dossiers of loan provision; the retention period of dossiers must comply with law.

Article 32h. Payment instruments used to disburse loans

Credit institutions shall use payment instruments to disburse loans under the State Bank of Vietnam’s regulations on modes to disburse loans of credit institutions to customers. In case an individual customer wishes to borrow consumer loans and undergoes customer identification and know-your-customer information verification under Article 32b of this Circular, a credit institution may consider and decide on disbursement of the loan to the customer’s payment account at the payment service provider for the customer to pay to the beneficiary for consumption needs as committed by the customer.”.

Article 2. To annul Clause 5, Article 7 of Circular No. 39/2016/TT-NHNN.

Article 3. Responsibility for organization of implementation

The Chief of the Office, the Director of the Monetary Policy Department, and heads of units of the State Bank of Vietnam, and credit institutions shall organize the implementation of this Circular.

Article 4. Implementation provisions

1. This Circular takes effect on September 1, 2023.

2. For loan agreements and credit contracts signed before the effective date of this Circular, credit institutions and clients may continue performing such loan agreements and credit contracts in accordance with regulations effective at the time of their signing. The modification and supplementation, if any, of loan agreements or credit contracts must comply with this Circular.-

For the Governor of the State Bank of Vietnam
Deputy Governor
PHAM THANH HA