CIRCULAR Prescribing the provision of loans by credit institutions and foreign bank branches to clients ____________________________________ Pursuant to the June 16, 2010 Law on the State Bank of Vietnam; Pursuant to the June 16, 2010 Law on Credit Institutions; Pursuant to the Government’s Decree No. 156/2013/ND-CP of November 11, 2013, 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 prescribing the provision of loans by credit institutions and foreign bank branches to clients. Chapter I GENERAL PROVISIONS Article 1. Scope of regulation and subjects of application 1. This Circular prescribes the provision of loans by credit institutions and foreign bank branches (below referred to as credit institutions) to clients. 2. This Circular does not regulate the provision of loans among credit institutions. Article 2. Interpretation of terms In this Circular, the terms below are construed as follows: 1. Provision of loans means a form of credit extension by which a credit institution gives or commits to give a client a sum of money for use for a specific purpose in a certain period of time as agreed upon on the principle of repayment of both principal and interest. 2. Lending credit institution means a credit institution established and operating under the Law on Credit Institutions, including: a/ Commercial bank; b/ Cooperative bank; c/ Non-bank credit institution; d/ Micro financial institution; dd/ People’s credit fund; e/ Foreign bank branch. 3. Client borrowing loans from a credit institution (below referred to as client) means a legal person or an individual, being: a/ A legal person established and operating in Vietnam, a legal person established overseas and lawfully operating in Vietnam; b/ An individual bearing the Vietnamese citizenship, an individual bearing foreign citizenship. 4. Loan for daily-life needs means the provision of a loan by a credit institution to an individual client to pay for his/her own and his/her family living expenses. 5. Loan for business or other activities (below referred to as business activities) means the provision of a loan by a credit institution to a client being a legal person or an individual to meet fund demand not prescribed in Clause 4 of this Article, including fund demand of such legal person or individual or of the business household or private enterprise owned by such individual. 6. Fund use plan means a set of information on the use of funds by a client, containing the following information: a/ The total fund needed, details of types of sources of the total fund needed (including loans needed to be borrowed from credit institutions); fund use purpose; and the period of fund use; b/ The client’s sources for debt repayment; c/ Business plan or project (not required for loans to cover daily-life expenses). 7. Financial capability means the fund and asset capability and other lawful financial resources of a client. 8. Loan term means a period of time counted from the day following the day on which a credit institution disburses a loan to its client to the point of time the latter has to fully repay the loan principal and interest as agreed upon between the credit institution and client. In case the last day of the loan term is a holiday or weekend, it will be the following working day. If the loan term is shorter than an entire day, provisions of the Civil Code on the starting point of time of a term shall be applied. 9. Debt repayment term means periods of time constituting the agreed loan term at the end of each period a client shall partially or fully repay the loan principal and/or interest to the credit institution. 10. Debt rescheduling means the adjustment of the debt repayment term or extension of a debt approved by a credit institution as follows: a/ Adjustment of the debt repayment term means the extension of a debt repayment term period (including no change in the number of agreed debt repayment terms) approved by the credit institution, without changing the loan term; b/ Extension of debt means the extension of the repayment of the loan principal and/or interest for a period exceeding the agreed loan term, which is approved by the credit institution. 11. Overdue loan principal balance comprises: a/ The overdue loan principal balance converted into an overdue debt under Article 20 of this Circular; b/ The loan principal balance that the client fails to pay ahead of schedule when the credit institution terminates the loan provision and recovers the debt ahead of schedule under Clause 1, Article 21 of this Circular. Article 3. Credit institutions’ autonomy 1. Credit institutions have autonomy in the provision of loans and take accountability for their lending decisions. No organizations or individuals may illegally intervene in the provision of loans by credit institutions. 2. Credit institutions may refuse clients’ requests that are incompliant with provisions of this Circular and loan agreements. Article 4. Principles of provision and borrowing of loans 1. The provision of loans by a credit institution to clients shall be conducted under the agreements between the credit institution and clients and in conformity with this Circular and relevant laws, including the law on environmental protection. 2. Clients borrowing loans from a credit institution shall ensure proper use of loans and repayment of the loan principal and interest on schedule as agreed with the credit institution. Article 5. Application of relevant legal documents 1. The provision of loans by credit institutions must comply with the Law on Credit Institutions, this Circular and other relevant laws. 2. Specific loan provision activities prescribed in specific documents of the Government, Prime Minister and State Bank of Vietnam must comply with such specific documents. In case a specific document of the Government, Prime Minister or State Bank of Vietnam prescribes the application of this Circular or some details relating to loan provision are not prescribed in such document, this Circular shall be applied. Specific loan provision activities include: a/ Providing syndicated loans; b/ Providing loans to clients for offshore investment; c/ Providing loans to clients to conduct business activities under socio-economic policies and programs of the Government and Prime Minister; d/ Providing foreign currency loans to resident clients; dd/ Providing and recovering loans overseas to and from non-resident clients; e/ Providing loans by people’s credit funds or micro financial institutions; g/ Providing consumer loans by finance companies; h/ Providing other specific loans as prescribed in specific documents of the Government, Prime Minister or State Bank of Vietnam. Article 6. Use of language 1. A loan agreement shall be made in Vietnamese or both Vietnamese and another foreign language. 2. For other documents concerning loan provision that are presented in a foreign language, if competent agencies request their Vietnamese translations, the translations must be certified by a competent person of the credit institution or be notarized or authenticated. Article 7. Conditions for borrowing loans A credit institution shall consider and decide to provide a loan to the client when the latter fully satisfies the following conditions: 1. Being a legal person who has the civil legal capacity as prescribed by law. A client is an individual who reaches full 18 years of age or older and has full civil act capacity as prescribed by law or who is between full 15 years of age and under 18 years of age and has not lost his/her civil act capacity or his/her civil act capacity is not restricted in accordance with law. 2. Having demand to borrow a loan for use for a lawful purpose. 3. Having a feasible loan use plan. 4. Having financial capability to repay debt. 5. A client who wishes to borrow a loan from a credit institution at the interest rate specified in Clause 2, Article 13 of this Circular, must be assessed by the credit institution as having a transparent and sound financial status. 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 law. 2. Paying expenses for or financing 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 law. 4. Buying gold bullions. 5. Repaying loan debts owed to 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 construction cost estimate approved by a competent authority in accordance with law. 6. Repaying loans provided by another credit institution and repaying foreign loans, excluding loans used for repaying debts ahead of schedule when fully satisfying the following conditions: a/ Being used for business activities; b/ The loan term does not exceed the remaining time of the existing loan’s term; c/ Having its term not yet rescheduled. Article 9. Dossiers of application for loans A client, who has a demand for a loan, shall send the credit institution documents proving the eligibility for such loan as prescribed in Article 7 of this Circular and other documents required by the credit institution. Article 10. Types of loans A credit institution shall consider and decide to provide clients the following types of loans: 1. Short-term loans, which have the maximum term of 1 (one) year. 2. Medium-term loans, which have a term of between more than 1 (one) year and 5 (five) years. 3. Long-term loans, which have a term of more than 5 (five) years. Article 11. Currencies of loan and repayment 1. Credit institutions and clients may agree on loans to be provided in Vietnam dong or a foreign currency in accordance with this Circular and relevant laws. 2. The currency used for debt repayment is the one in which the loan is provided. Article 12. Loan limit A credit institution may agree with its clients on the loan limits based on the clients’ fund use plans and financial capability and its credit extension limits applicable to clients and available funding sources,. Article 13. Loan interest rate 1. A credit institution and clients may agree on the loan interest rates according to the market’s fund supply and demand and the clients’ loan demand and credibility, except for the cases in which the maximum loan interest rate is set by the State Bank of Vietnam in Clause 2 of this Article. 2. A 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 business activities of small- and medium-sized enterprises under 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 operations of hi-tech enterprises under the Law on High Technologies and its guiding documents. 3. An agreement on the loan interest rate must specify the interest rate and method of calculating the interest on the loan. In case the interest rate is not expressed in %/year and/or the interest is not calculated based on the actual loan balance and the period to maintain such loan balance, the loan agreement must state the interest rate converted into %/year (on the basis of 365 days per year) and the interest calculated on the actual loan balance and the period to maintain such balance. 4. A client that fails to partially or fully repay the agreed loan principal and/or interest on the due date shall repay the loan interest as follows: a/ Accrued interest on the principal at the agreed interest rate corresponding to the loan term at the end of which repayment has not been made; b/ If the client fails to pay the interest on schedule as stated at Point a of this Clause, he/she/it shall pay a late payment interest at the interest rate agreed upon between the credit institution and client not exceeding 10%/year on the late paid interest for the late payment period; c/ In case a loan debt is converted into an overdue debt, the client shall pay accrued interest on the overdue loan principal balance for the late payment period at an interest rate not exceeding 150% of the interest rate applied to the undue loan from the time of conversion into an overdue debt. 5. In case the adjustable interest rate is applied to a loan, the credit institution and client shall agree on principles and factors for determining the adjusted interest rate and time for adjustment. If the use of factors for determining the adjusted interest results in different interest rates, the credit institution shall apply the lowest one. Article 14. Charges for loan provision A credit institution and clients shall agree on the collection of charges for loan provision, including: 1. Charge for ahead of schedule repayment of debts in case a client repays debts prior to the due date. 2. Charge for the line of provisional credit. 3. Charge for arrangement of syndicated loans. 4. Charge for making a commitment to withdraw a loan from the effective date of the loan agreement to the date of the initial disbursement of the loan. 5. Other charges in relation to the loan provision specified in relevant legal documents. Article 15. Loan security 1. Credit institutions and clients shall agree on whether or not to take loan security measures. An agreement on loan security measures between a credit institution and a client must comply with the law on security measures and relevant laws. 2. Credit institutions shall decide and take responsibility for unsecured loans. 3. Clients and securing parties shall cooperate with credit institutions in handling security assets when there arise grounds for such handling under loan agreements, loan security contracts and laws. Article 16. Information provision 1. A credit institution shall provide clients with all information before the establishment of a loan agreement, including the loan interest rate; principles and factors and the point of time for determining the loan interest rate in case the adjustable interest rate is applied; the interest rate on the overdue loan principal balance; the interest rate applicable to late paid interest; method of calculating the interest on the loan; types of charges and charge rates applicable to the loan; and criteria for identifying clients to be eligible for loans with the interest rate mentioned in Clause 2, Article 13 of this Circular. 2. Clients shall provide information to the credit institution and take responsibility before law for the accuracy, truthfulness and adequacy of documents sent to the credit institution: a/ The documents prescribed in Article 9 of this Circular; b/ Reports on loan use and proving loans to be used for proper purposes as stated in the loan agreements; c/ Documents proving the application of loan security measures. Article 17. Appraisal and lending decisions 1. Credit institutions shall appraise clients’ capability to satisfy the conditions for taking out loans under Article 7 of this Circular to make lending decisions. Credit institutions may use their internal credit rating system together with information from the National Credit Information Center of Vietnam and other information channels for the appraisal. 2. Credit institutions shall consider and approve loan provision based on the principle of separation of appraisal and decision-making responsibilities. 3. In case of refusal to provide a loan, a credit institution shall notify the reason therefor to the client at the latter’s request. Article 18. Repayment of loan principal and interest 1. A credit institution and clients may agree on the repayment term of the loan principal and interest as follows: a/ Repaying the loan principal and interest in different terms; b/ Repaying the loan principal and interest in the same term. 2. A credit institution and clients may agree on the latter’s debt repayment prior to the due date. 3. In case a client cannot partially or fully repay the loan principal and/or interest on the due date, the credit institution shall consider approving the debt rescheduling under Article 19 or the conversion into an overdue debt under Article 20 of this Circular. The credit institution and client shall agree on the calculation of the payable interest in conformity with Clause 4, Article 13 of this Circular. 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. Article 19. Debt rescheduling A credit institution may consider and decide to reschedule a client’s debt at the latter’s request and on the basis of the credit institution’s financial capability and result of evaluation of the client’s debt repayment capability as follows: 1. If the client fails to make due payment of his/her loan principal and/or interest and is evaluated by the credit institution as having capability of paying off the loan principal and/or interest according to the to-be-adjusted debt payment term, the credit institution may consider adjusting the payment term of his/her loan principal and/or interest suitable to the client’s sources for debt payment without changing the loan term. 2. If the client fails to pay off his/her loan principal and/or interest within the agreed loan term and is evaluated by the credit institution as having capability of paying off loan principal and/or interest within a certain period following the loan term, the credit institution may consider an extension suitable to the client’s sources for debt payment. 3. Debt rescheduling shall be decided before or within 10 (ten) days from the agreed date of debt payment. Article 20. Overdue debts A credit institution may convert the loan principal balance into an overdue debt when the client fails to pay the debt according to the agreed loan term and the credit institution refuses to approve debt rescheduling, and notify the client thereof. Such a notification must at least specify the overdue loan principal balance, the time of conversion into an overdue debt and the interest rate applied to the overdue loan principal balance. Article 21. Termination of loan provision, settlement of debts and exemption from and reduction of loan interest and charges 1. A credit institution may terminate the provision of a loan and recover debts ahead of schedule as agreed upon when detecting that the client has provided false information or breached the loan agreement and/or loan security contract. When terminating the loan provision or recovering debts ahead of schedule according to the loan agreement, the credit institution shall notify the client thereof. Such a notification must at least specify the time of termination of the loan provision and recovery of debts ahead of schedule, the loan principal balance subject to recovery; the time for repayment of such the loan principal balance, the time when such balance will be converted into an overdue debt and the interest rate applied to such loan principal balance. 2. In case a client fails to pay a due debt, a credit institution may apply debt recovery methods according to the loan agreement, security contract and

Circular 39/2016/TT-NHNN