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 dated December 12, 2016, of the Governor of the State Bank of Vietnam, prescribing the provision of loans by credit institutions and foreign bank branches to clients

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

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

Pursuant to the Government’s Decree No. 102/2022/ND-CP dated 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 hereby promulgates the Circular amending and supplementing a number of articles of Circular 39/2016/TT-NHNN dated December 12, 2016, of the Governor of the State Bank of Vietnam, prescribing the provision of loans by credit institutions and foreign bank branches to clients (hereinafter referred to as Circular 39/2016/TT-NHNN).

Article 1. Amending and supplementing a number of articles of Circular No. 39/2016/TT-NHNN

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

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

“c) Business plans or projects, or plans or projects to serve daily-life needs to buy houses; construction and renovation of houses; receipt of the transfer of land use rights for house construction.”.

b) To add Clause 12 as follows:

“12. Loan for financial offsetting means the provision of a loan by a credit institution to a client to offset already paid expenses with the client's own capital or loans from individuals or organizations (excluding credit institutions) to implement business plans or projects or plans or projects to serve daily-life needs.”.

2. To amend and supplement Article 8 as follows:

“Article 8. Demands ineligible for borrowing loans

A credit institution may not provide loans to meet the following demands:

1. Carrying out investment or business activities in sectors and trades in which such activities are banned by the Law on Investment.

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

3. Buying and using goods and services of sectors and trades in which investment and business activities are banned by the Law on Investment.

4. Buying gold bullions.

5. Repaying the credit extended at the lending credit institution, excluding loans used for paying the loan interest arising in the course of work construction whereby the loan interest is included in the total construction investment approved by a competent authority in accordance with law.

6. Repaying foreign loans (excluding deferred payment foreign loans for goods), credit extended by another credit institution, excluding loans used for repaying debts ahead of schedule when fully satisfying the following conditions:

a) The loan term does not exceed the remaining time of the existing loan’s term;

d) Having its term not yet rescheduled.

7. Depositing money.

8. Paying capital contributions, purchasing, receiving the transfer of contributed capital of limited liability companies, partnerships; paying capital contributions, purchasing, receiving the transfer of shares of joint-stock companies not listed on the securities market or not registered for trading on the Upcom trading system.

9. Paying the capital contribution under the capital contribution contract, investment cooperation contract or business cooperation contract for the implementation of an investment project that is ineligible to be put into business as prescribed by law at the time the credit institutions decide to provide loans.

10. For financial offsetting, unless the loan fully meets the following conditions:

a) The client has advanced the client's own capital to pay and cover the cost of implementing the business project, which has been incurred less than 12 months up to the time the credit institutions decide to provide loans;

b) Expenses that have been paid with the client’s own capital for the purpose of implementing the business operation project are the expenses using the loan source of the credit institution according to the plan on using the capital already sent to the credit institution to be considered for medium and long-term loans to carry out that business project.”.

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

“2. The currency used for debt repayment is the one 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 complied with in accordance with relevant laws.”.

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

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

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

b) Implementing export business plans under the Commercial Law and its guiding documents;

c) Serving the business 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 supporting small- and medium-sized enterprises;

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

dd) Serving the business of hi-tech enterprises on the List of high technologies prioritized for development investment approved by the Prime Minister, high-tech enterprises under the provisions of the Law on High Technologies and its guiding documents.”.

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

“4. A credit institution and clients may agree on the order for recovery of the loan principal and interest. For overdue debts, the credit institution shall recover the loan principal first and the loan interest later. For loans with one or several overdue repayment terms, the credit institution shall collect debts in the order of collection of overdue principals, collection of interest on unpaid overdue principals, collection of due principals, collection of interest on the principal that has not been paid by the due date.”.

6. To amend and supplement Clause 1, 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 laws, a credit institution shall issue internal regulations on loan provision, including provision of loans by electronic means (if any), 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 Article 2 as follows:

“a) Conditions for provision of loans, specifying specific criteria for determining the demand for loans to be used for lawful purposes, having a feasible plan to use capital and having financial capacity to repay the debt; fund demands ineligible for loans; modes of loan provision; loan interest rates and loan interest calculation methods; criteria for determining that clients with transparent and healthy financial situation are entitled to borrow capital at the lending interest rates specified in Clause 2 Article 13 of this Circular; dossiers for loan provision and documents, data to be sent by clients to the credit institution in conformity with characteristics and types of loans and potential clients; debt recovery; the conditions, process and procedures for debt rescheduling; the conversion into overdue debts; specifying lending conditions without the application of security measures, decentralizing the authority to decide on loan provision without applying security measures.”.

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

b) The process of appraisal, approval and making of lending decisions, specifying:

(i) The maximum time limit for appraisal and making a lending decision; decentralization, authorization and responsibilities of each person and section in the appraisal, approval and making a lending decision, including provision of loans by electronic means under Article 32dd of this Circular (if any); and other contents of the process of appraisal, approval and making of lending decisions;

(ii) The case of lending to pay for capital contribution under the capital contribution contract, investment cooperation contract or business cooperation contract for project implementation;

(iii) Measures to be taken to block the loan disbursement amount at the lending credit institution as prescribed by law, terms provided by the parties in the loan agreement until the termination of the security obligation, in case of lending to pay money to secure the performance of obligations;”.

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 section in the examination and supervision of clients in the borrowing and use of loans and repayment of debts;

(ii) Measures to be taken to inspect, supervise and assess the financial situation, source of debt repayment of clients, ensuring the ability to fully recover loan principal and interest on time as agreed, control the use of loan capital for the right purpose, in case of lending to pay for capital contribution under the capital contribution contract, investment cooperation contract or business cooperation contract for project implementation;

(iii) Loans to pay money to secure the performance of obligations, to ensure the recovery of loan capital in case the parties fail to properly perform the agreement on security obligations;”.

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

“e) The identification of risks that may arise; regulations on monitoring, evaluation and control of risks; plans for risk handling during the lending process (including providing loans by electronic means);”.

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 agreed due date, correctly reflecting credit quality. The control of loan provision for securities business investment; loans to buy and trade real estate; loans for investment projects in the form of public-private partnership; loans to cover daily-life expenses of great value as assessed by credit institutions; loan provision by electronic means.”.

 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 it has been provided with sufficient information.”.

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

“2. A credit institution has the right and obligation to examine and supervise clients in using loans and repaying debts according to law provisions and the internal process referred to at Point c Clause 2 Article 22 of this Circular.”.

9. To amend and supplement Clause 2 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 regulations of the State Bank of Vietnam on the modes to disburse loans of credit institutions to clients.”.

b) To add Clause 5 as follows:

“5. In case of lending to pay money to secure the performance of obligations, the credit institution must freeze the loan disbursement amount at the lending credit institution in accordance with the law and terms provided by the parties in the loan agreement until the termination of the security obligation.”.

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

a) To amend and supplement Clause 1 as follows:

“Single loan: For each single loan, the credit institution and client shall perform procedures for loan provision for clients and sign a loan agreement.”.

a) To amend and supplement Clause 4 as follows:

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

a) To amend and supplement Clause 5 as follows:

“5. Loan provided within a line of provisional credit: The credit institution shall pledge to guarantee loan provision to the client within the agreed line of provisional credit (beyond the scope of agreed line of credit). The credit institution and client shall agree on the validity period of the line of provisional credit which must not exceed 1 (one) year.

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

“Section 3: PROVISION OF LOANS BY ELECTRONIC MEANS

Article 32a. Principles of provision of loans by electronic means

1. Credit institutions shall provide loans by electronic means in accordance with their business conditions, loans’ characteristics, while ensuring security, safety, protecting data messages, and confidentiality according to the law on anti-money laundering, e-transactions, and instructions on risk management of the State Bank of Vietnam, and relevant legal documents.

2. The information system providing loans by electronic means must follow the regulations on ensuring information system security at level 3 or higher according to the Government’s provisions on the security of information systems by classification, and the State Bank of Vietnam's provisions on security of information systems in banking activities.

3. Credit institutions must store and preserve information and data in accordance with law, ensure security, confidentiality, and may back up them to ensure the completeness and integrity of access permission dossiers, use when necessary or to serve the inspection, comparison, settlement of reconciliation, complaints, disputes and provide information upon request from competent state management agencies.

4. Credit institutions shall decide measures, forms and technologies to serve the provision of loans by electronic means by themselves, bear all arising risks (if any) and meet at least the following requirements:

a) Having technical technologies and solutions to ensure the accuracy, security and safety during the course of collection, use and inspection of information and data;

b) Taking measures for inspection, comparison, update and verification of information and data; taking measures to prevent act of forgery, intervention or modification to falsify information and data;

c) Taking measures for monitoring, identification, measurement and control of risks; having plans for handling risks;

d) Assigning specific responsibility for each individual or department involved in the provision of loans by electronic means in the management and control of risks.

5. Credit institutions shall consider and decide on providing loans by electronic means in accordance with Section 3 of this Circular. The contents that are not mentioned in Section 3 of this Circular shall comply with relevant provisions of this Circular.

Article 32b. Identification and verification of client identification information

1. Credit institutions must have technical technologies and solutions to identify and verify client identification information serving the provision of loans by electronic means; take responsibility for arising risks (if any) and meet at least the following requirements:

a) Ensuring the correct match between client identification information, client’s biometric data (which are biological factors and characteristics associated with clients to perform identification, difficult to fake, with low rate of overlap, such as fingerprints, face, iris, voice and other biometric factors) with the corresponding biometric information and factors on documents and data necessary to identify clients in accordance with the law on anti-money laundering, at the request of a credit institution or with personal identification data authenticated by a competent state agency or with a citizen identity database, the national database on population or by an organization providing electronic authentication services in accordance with the law on electronic identification and authentication or by another credit institution;

b) Developing a process for risk management, control, and assessment, including measures to prevent acts of impersonation, interference, modification or falsification of client identification information during the lending process; taking measures to check and verify client identification information to ensure that clients who perform transactions by electronic means are borrowers; taking technical measures to confirm that the identified client agrees to the loan agreement. The process for risk management and control must be regularly reviewed and completed based on the updated information and data;

c) Storing and preserving sufficient detailed client identification information, client’s biometric data; sound, images, video recordings, sound recordings; phone number to make the transaction; transaction log during the lending process.

2. The identification and verification of client identification information specified in Clause 1 of this Article shall apply to clients being individual borrowers for personal consumption purposes who establish the relationship at the credit institution for the first time. In case clients are individual borrowers for personal consumption purposes who have establish the relationship at the credit institutions and the identification and verification of client identification information have been completed, credit institutions may decide to apply measures, forms or technologies to identify client identification information to serve the provision of loans by electronic means, matching with known information about clients.

Article 32c. Loan balance

The loan balance for an individual client who borrows money to serve life needs and has client identification information identified and verified as prescribed in 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

A client, who has a demand for a loan, shall send the credit institution documents and data proving the eligibility for such loan as prescribed in Article 7 of this Circular and other documents and data under the credit institution’s instructions.

Article 32dd. Appraisal and lending decisions

Credit institutions that organize the approval of loan provision by electronic means must ensure the principle of assigning responsibilities of each individual, the department that builds, set up and operate an information system to serve the appraisal and making of loan decision. In case of risks arising, credit institutions must have a mechanism to identify each responsible individual and department and promptly handle arising problems and risks to ensure efficiency and safety in the credit institutions’ organization for approval of loan provision by electronic means.

Article 32e. Loan agreements

The loan agreement shall be made in writing, in the case of an electronic contract, it must comply with the law on e-transactions and must contain at least the contents specified in Article 23 of this Circular.

Article 32g. Archive of dossiers of loan provision

1. Credit institutions shall prepare a dossier of loan provision in the form of data messages in accordance with the laws on archiving, e-transactions and relevant laws, including:

a) Loan agreement;

b) Report on the client’s financial status;

c) The decision on loan provision electronically signed by a competent person; in case of a collective decision, a minutes stating the adoption of the decision is required;

d) Client identification information and data (if any); information and data arising in the process of using the loan related to the loan agreement under the guidance of the credit institution.

2. A credit institution shall archive dossiers of loan provision; the archival period must comply with law.

Article 32h. Means of payment used to disburse loan funds

Credit institutions shall use payment instruments to disburse loans under the regulations of the State Bank of Vietnam on the modes to disburse loans of credit institutions to clients. In case the client is an individual who borrows money to serve daily life needs and has the client identification information identified and verified as prescribed in Article 32b of this Circular, the credit institution may consider and decide the disbursement of the loan to the client’s current account at the payment service provider for the client to pay and pay the beneficiary for the purpose of borrowing capital to serve the life needs as committed.”.

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

Article 3. Responsibility for implementation organization

The Chief of Office, Director of the Monetary Policy Department, Heads of units affiliated to the State Bank of Vietnam; credit institutions shall implement this Circular.

Article 4. Effect

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

2. For loan agreements and credit contracts signed before the effective date of this Circular, credit institutions and clients may continue to perform terms of the signed loan agreements and credit contracts in accordance with the laws in force at the time of signing such loan agreements and credit contracts. Any amendments or supplements to the loan agreements or credit contracts must conform to the provisions of this Circular./.