On December 28, 2018, the State Bank of Vietnam (SBV) issued Circular No. 42/2018/TT-NHNN amending and supplementing a number of articles of Circular No.24/2015/TT-NHNN of the SBV Governor regulating the provision of loans in foreign currencies by credit institutions and foreign bank branches to borrowers who are residents in Vietnam.
The issuance of the new Circular is aimed at specifying the Government’s direction on limiting the dollarization of the economy and gradually implementing the roadmap to change the relation of mobilizing – lending into the relation of buying-selling of foreign currencies.
The main substances of Circular No. 42/2018/TT-NHNN are as follows:
I. Amending Paragraph 1 of Article 3 of Circular No. 24/2015/TT-NHNN:
1. Credit institutions and foreign bank branches are allowed to consider the provision of a loan in a foreign currency in the following situations:
a) Providing short-term loans for overseas payments for the imports of goods and services for the production and trade of commodities to meet the demand in the domestic market when the borrower has sufficient foreign currencies from their revenues to pay back the debt. This regulation will be valid only until March 31, 2019;
b) Providing short-term loans for overseas payments for the imports of goods and services for the production and trade of commodities to be exported across Vietnam’s border when the borrower has sufficient foreign currencies from their revenues to pay back the debt;
c) Providing long and medium-term loans for overseas payments for the imports of goods and services when the borrower has sufficient foreign currencies from their revenues to pay back the debt. This regulation is valid only until September 30, 2019;
d) Providing short-term loans for focal petroleum importing enterprises which are allocated with annual quotas of petroleum imports by the Ministry of Industry and Trade (MOIT) for serving the overseas settlements for the imported petroleum when the enterprises do not have or do not have enough foreign currencies from their production and trading revenues to pay back the debts;
dd) Providing short-term loans to meet the capital demands in the domestic market in order to implement the production and trading plans of commodities to be exported across Vietnam’s border when the borrower has sufficient foreign currencies from their revenues to pay back the debt. When the credit institution or the foreign bank branch disburses the loans, the borrower has to sell the foreign currency amount to that credit institution or foreign bank branch in the form of a spot transaction, excluding the case that the customer is borrowing to pay back a loan which is required to be paid in a foreign currency by the laws.
e) Providing loans for overseas investments in the investment projects or programs of which the overseas investment concepts have been approved by the National Assembly or the Prime Minister, and have received the certificates of overseas investment registration issued by the Ministry of Planning and Investment (MPI).
II. Transitional regulations:
1. For credit contracts applying the method of lending with a credit limit or lending agreements applying the method of lending with a credit limit, which are signed before the effective date of this Circular, while the agreement on each loan is signed after the effective date of this Circular, the credit institutions, foreign bank branches and borrowers shall implement the regulations of this Circular.
2. Excluding the cases as stipulated in Paragraph 1 of this Article, for the credit contracts or lending agreements which are signed before the effective date of this Circular, the credit institutions, foreign bank branches and borrowers shall continue to implement the signed substances in accordance with the applicable laws at the time of signing. In case of any amendment and/or supplement to the credit contract or the lending agreement, the revised substances must be in compliance with this Circular.
This new Circular takes effect from January 1, 2019.
Le Hang