Circular 19/2024/TT-NHNN amend 08/2023/TT-NHNN borrowing of foreign loans not eligible for government guarantee

CIRCULAR

Amending and supplementing a number of articles of
the Circular No. 08/2023/TT-NHNN dated June 30, 2023 of the Governor of the State Bank of Vietnam providing conditions on borrowing of foreign loans not eligible for government guarantee

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

Pursuant to the Law on Credit Institutions dated January 18, 2024;

Pursuant to the Ordinance on Foreign Exchange dated December 13, 2005; the Ordinance Amending and Supplementing a Number of Articles of the Ordinance on Foreign Exchange dated March 18, 2013;

Pursuant to the Government’s Decree No. 219/2013/ND-CP dated December 25, 2013, on the management of enterprises’ borrowing and repayment of foreign loans not eligible for Government guarantee;

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 Foreign Exchange Management Department;

The Governor of the State Bank of Vietnam hereby promulgates the Circular amending and supplementing a number of articles of the Circular No. 08/2023/TT-NHNN dated June 30, 2023 of the Governor of the State Bank of Vietnam providing conditions on borrowing of foreign loans not eligible for government guarantee.

Article 1. To amend and supplement a number of articles of the Circular No. 08/2023/TT-NHNN

1. To add Clause 9 to Article 3 as follows:

“9. Foreign loans arising from the issuance of letter of credit by credit institutions or foreign bank branches (issuing banks) mean loans arising from the operation of issuing deferred letter of credit with the terms of immediate payment or prepayment prior to the letter of credit’s due date under the current laws on letter of credit and other business activities related to letter of credit. In which, the issuing banks (borrowers) shall receive the credit from the reimbursing banks (lenders) being non-residents in case the reimbursing banks make payment to the beneficiaries by using their funds before the letter of credit’s due date as agreed in the letter of credit.”

2. To add Article 5a as follows:

“Article 5a. Foreign loans for payment for contracts on import of goods of borrowers not being credit institutions or foreign bank branches

1. For foreign loans for payment for contracts on import of goods on deferred payment to serve the implementation of a borrower’s investment projects or production and business plans or other projects:

a) The borrower’s borrowing purpose is to implement its investment projects or to implement its production and business plans or other projects as defined in Article 17 of this Circular;

b) The borrower may exclude outstanding loans of medium- or long-term foreign loans, using goods of contracts on import of goods on deferred payment upon calculation of foreign borrowing limits specified at Point a Clause 1 and Clause 2 Article 18 of this Circular.

2. Borrowers may take out foreign loans to pay for contracts on import of goods (including mandatory debt payment to the issuing banks) according to the letter of credit issued by the issuing banks.”

3. To amend and supplement Clause 3 Article 9 as follows:

“3. The foreign loan agreement must be entered into in writing before or on the date of withdrawal of the foreign loan. A foreign loan agreement shall only be entered into on the date of withdrawal of a foreign loan in the following cases:

a) Short-term foreign loans provided that the loan disbursement is made after the parties enter into the loan agreement;

b) Foreign loans arising from the transfer of money for investment preparation of projects that have been granted investment registration certificates into foreign loans in accordance with the law on foreign exchange management for activities of loans for foreign debt repayment and foreign direct investment activities in Vietnam;

c) Short-term foreign loans arising from the operation of letter of credit of credit institutions or foreign bank branches.”

4. To amend and supplement Article 14 as follows:

“Article 14. Purposes of foreign borrowing

1. A borrower may take out a short-, medium- and long-term foreign loan for the following purposes:

a) Supplementing capital for credit extension activities according to the borrower’s credit growth;

b) Restructuring foreign debts of the borrower;

c) Making payment to the beneficiaries via the reimbursing banks in the issuance of deferred letter of credit with the terms of immediate payment or prepayment prior to the letter of credit’s due date under the current laws on letter of credit and other business activities related to letter of credit.

2. Except for the case defined at Point c Clause 1 of this Article, a borrower taking out a medium- and long-term foreign loan must prove the purpose of foreign loans through:

a) The plan on use of foreign loans as prescribed in Clause 2, Article 7 of this Circular in case of borrowing to accomplish the purposes specified at Point a, Clause 1 of this Article;

b) Debt restructuring plan as prescribed in Article 8 of this Circular in case of borrowing to accomplish the purposes specified at Point b, Clause 1 of this Article.”

5. To amend and supplement Article 15 as follows:

“Article 15. Short-term foreign borrowing limits

1. Borrowers may only borrow short-term foreign loans in case the short-term foreign borrowing limit is met as of December 31 of the year preceding the time of loan origination. Short-term foreign borrowing limit is the maximum ratio of the total principal balance of short-term foreign loans based on core capital, specifically as follows:

a) 30%, for commercial banks;

b) 150%, for foreign bank branches or other credit institutions.

2. Clause 1 of this Article shall not apply to cases where foreign loans arise from the issuance of letter of credit by credit institutions or foreign bank branches”.

6. To amend and supplement Clause 1 Article 16 as follows:

“1. When taking out short-term foreign loans or foreign loans arising from the issuance of letter of credit by credit institutions or foreign bank branches, the borrower must ensure compliance with the law on prudential ratios in the Law on Credit Institutions at the end of the last 3 months prior to the date of signing a foreign loan agreement or an agreement to increase the value of foreign loans, except for the case specified at Point c, Clause 2 of this Article.”

Article 2. Responsibility of implementation organization

The Chief of Office, the Director of the Foreign Exchange

Management Department, heads of units of the State Bank of Vietnam, credit institutions, foreign bank branches, enterprises, cooperatives and cooperative unions shall be responsible for the implementation of this Circular.

Article 3. Implementation provisions

1. This Circular takes effect on July 01, 2024.

2. To amend Clause 1 Article 11 of the Circular No. 12/2022/TT-NHNN dated September 30, 2022 of the Governor of the State Bank of Vietnam guiding foreign exchange management for foreign loan borrowing and repayment by enterprises as follows:

“1. Medium- and long-term foreign loans, except for foreign loans arising from the operation of issuing letter of credit of credit institutions or foreign bank branches”.