On May 29, 2018, the Governor of the State Bank of Vietnam (SBV) issued Circular No.14/2018/TT-NHNN guiding the implementation of several measures of the monetary policy management in order to support the credit institutions, the foreign bank branches to provide loans for agricultural and rural development in line with Degree No.55/2015/ND-CP on the credit policy for agricultural and rural development.
The targets of this support are commercial banks, the Co-operative Bank, non-bank credit institutions (except finance leasing companies, finance factoring companies), microfinance organizations, people’s credit funds, and foreign bank branches in Vietnam (hereinafter referred to as credit institutions).
Accordingly, credit institutions that provide loans to agricultural and rural development will receive support through the following measures:
First, credit institutions that provide loans for agricultural and rural development will receive refinancing support in line with applicable regulations on refinancing credit institutions.
Second, those credit institutions will receive support in terms of reserve requirement ratios, particularly:
a - Lower reserve requirement ratios applied to the deposits in VND as compared to the reserve requirements regulated by the SBV in relation to each category of credit institutions in different periods:
- For credit institutions with the average ratios of outstanding credit in agricultural and rural areas over the total outstanding credit (hereinafter referred to as the average credit ratios for agricultural and rural areas) of 70% or higher, the credit institutions can propose their reserve requirement ratios, provided that those ratios will be no less than one twentieth (1/20) of the reserve requirement ratios corresponding to each type of deposits as regulated by the SBV for that category of credit institutions.
- For credit institutions with the average credit ratios for agricultural and rural areas of 40% to below 70%, the credit institutions can propose their reserve requirement ratios, provided that those ratios will be no less than one fifth (1/5) of the reserve requirement ratios corresponding to each type of deposits as regulated by the SBV for that category of credit institutions.
b - The reserve requirement ratio support as stipulated in Section a above will be valid for a period of six (6) months. The Circular also provides guidance on how to determine the average credit ratios for agricultural and rural areas in specific periods of time, to be used as basis for assessing if a credit institution meets the criteria for the reserve requirement ratio support.
c - For credit institutions with the average credit ratios for agricultural and rural areas of 40% or higher, but without the need to apply the reserve requirement ratio support as stipulated in Section a above, the regulations of reserve requirements in this Circular should not apply.
The Circular takes effect from July 13, 2018.
MH