Banks are allowed to lend beyond the limit to many subjects.

Deputy Prime Minister Vuong Dinh Hue has just signed Decision 13/2018/QD-TTg stipulating the conditions, documents, and procedures for requesting approval of maximum credit levels exceeding the limits of credit institutions and foreign bank branches.

This maximum credit level applies to one customer, one customer and related person as prescribed in Clauses 1, 2, 7, Article 128 of the Law on Credit Institutions 2010 (as amended and supplemented).

The decision with the new mechanism, effective from May 1, 2018, will create more proactive and flexible conditions for credit institutions, as well as borrowers in many fields.

The above decision stipulates the conditions for considering credit granting exceeding the limit. Accordingly, the borrowers, projects and plans proposed for credit granting exceeding the limit have a fairly large scope and target group, with the following conditions.

Specifically, customers must meet the credit granting conditions as prescribed by law, have no bad debt in the last 3 years immediately preceding the year of requesting credit granting exceeding the limit, and have a debt-to-equity ratio of no more than three times the equity recorded on the customer's quarterly financial statements or annual financial statements at the time closest to the time of requesting credit granting exceeding the limit.

Customers who need capital to carry out projects and production and business plans to carry out socio-economic development tasks in one of the cases specified in the above decision.

That is, implementing projects and plans of important and urgent socio-economic significance to carry out socio-economic development tasks, serving the essential needs of people's lives in the following sectors and fields: electricity, coal, oil and gas, petrol, transportation, public transport and other fields under the direction of the Government and the Prime Minister from time to time.

Or customers borrow capital to implement investment programs and projects decided by the National Assembly or the Prime Minister; invest in priority and encouraged areas according to resolutions of the National Assembly and the Government on socio-economic development in each period.

The project or plan for requesting credit exceeding the limit has been assessed by the credit institution as feasible, the customer has the ability to repay the debt and the decision to grant credit is made; it meets current regulations on investment and construction, is consistent with the planning and production and business plan and has been approved by the competent authority or granted an investment registration certificate.

The above Decision also states the conditions that credit institutions must meet when implementing this mechanism.

Regarding syndicated credit, proposed and implemented necessary procedures according to the provisions of law on syndicated credit for projects and plans requesting credit exceeding the limit where the syndicated capital capacity of credit institutions has not met the loan requirements of a customer; or issued syndicated invitations to at least 5 other credit institutions, posted on the official electronic information page of the credit institution, mass media for at least 30 working days but no other credit institutions participated in the syndicated capital.

At the time of requesting credit exceeding the limit, the credit institution must meet the requirements on limits and safety ratios in operations as prescribed by the Law on Credit Institutions and relevant legal regulations.

The credit institution shall fully implement the requirements related to responsibilities and obligations stated in the application for credit granting exceeding the limit and the previous approval documents for credit granting exceeding the limit.

The organization shall ensure the credit limit prescribed in Clause 8, Article 128 of the Law on Credit Institutions 2010 when including the credit limit exceeding the proposed limit.

Before the above decision, lending by credit institutions must comply with the limits specifically defined in Circular 36 of the State Bank.

In that circular, it is stipulated that the total outstanding credit balance for a customer must not exceed 15% of the equity capital of the bank or foreign bank branch; the total outstanding credit balance for a customer and related persons must not exceed 25% of the equity capital of the bank or foreign bank branch.

The total outstanding credit balance for a customer must not exceed 25% of the equity capital of a non-bank credit institution; the total outstanding credit balance for a customer and related persons must not exceed 50% of the equity capital of a non-bank credit institution.

The Prime Minister shall prescribe the conditions, documents and procedures for requesting approval of maximum credit levels exceeding the prescribed limits.

In the coming time, the decision with the new mechanism, effective from May 1, 2018, will create more proactive and flexible conditions for credit institutions, as well as borrowers in various fields and meeting the above conditions.