New regulations on foreign currency lending

The State Bank has issued Circular No. 24/2015/TT-NHNN regulating foreign currency lending by credit institutions and foreign bank branches to borrowers who are residents.

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Accordingly, credit institutions and foreign bank branches are considered to decide to lend in foreign currency for the following capital needs:

a- Short-term, medium-term and long-term loans to pay abroad for imported goods and services when the borrower has enough foreign currency from production and business revenue to repay the loan;

b- Short-term loans to key petroleum import enterprises assigned by the Ministry of Industry and Trade with annual petroleum import quotas to pay abroad for petroleum import when the borrower does not have or does not have enough foreign currency revenue from production and business activities to repay the loan;

c- Short-term loans to meet domestic short-term capital needs to implement plans for production and business of export goods through Vietnam's border gates where the borrower has enough foreign currency from export revenue to repay the loan; when the credit institution or foreign bank branch disburses the loan, the borrower must sell the borrowed foreign currency to the credit institution or foreign bank branch in the form of spot foreign exchange transactions, except in cases where the borrower's capital needs are to make payment transactions where the law stipulates that the transaction currency must be in foreign currency. This regulation is effective until March 31, 2016;

d- Lending for overseas investment in important national projects and works for which the National Assembly, the Government or the Prime Minister has decided on investment policies and for which the Ministry of Planning and Investment has granted overseas investment certificates.

Credit institutions and foreign bank branches shall consider and decide to lend in foreign currency for capital needs other than those specified above in priority areas, encouraging production and business development according to the provisions of Resolutions, Decrees, Decisions, Directives and other documents of the Government and the Prime Minister after receiving written approval from the State Bank of Vietnam in accordance with the procedures prescribed for each specific case.

Borrow in which foreign currency, repay in that foreign currency

The Circular clearly states that customers who borrow in a foreign currency must repay the principal and interest in that foreign currency. In case of repayment in another foreign currency, it must be done according to the agreement between the credit institution, foreign bank branch and the customer in accordance with the provisions of relevant laws.

In case when the foreign currency loan repayment deadline comes, due to objective reasons leading to late payment of foreign currency from the borrower's production and business activities, the borrower does not have enough foreign currency from production and business activities or other legal foreign currency income sources to repay the loan and is assessed and confirmed in writing by a credit institution or foreign bank branch, the lending credit institution or foreign bank branch shall sell foreign currency to the borrower to repay the loan and the borrower commits to sell that foreign currency to the lending credit institution or foreign bank branch upon receiving foreign currency from production and business activities.

For loans to key petroleum import enterprises assigned by the Ministry of Industry and Trade with annual petroleum import quotas, if the borrower does not have or does not have enough legal foreign currency income to repay the loan, the credit institution or foreign bank branch that lends the loan shall sell foreign currency to the borrower to repay the principal and interest of the loan.

This Circular takes effect from January 1, 2016. At the same time, Circular No. 43/2014/TT-NHNN of the Governor of the State Bank of Vietnam regulating foreign currency lending by credit institutions and foreign bank branches to borrowers who are residents is annulled.

According to Chinhphu.vn