Decision 314/QD-NHNN: Shall the State Bank of Vietnam reduce the interest rate for short-term loans in VND from March 15, 2023?
Shall the State Bank of Vietnam reduce the interest rate for short-term loans in VND from March 15, 2023?
On March 14, 2023, the State Bank of Vietnam has just issued Decision 314/QD-NHNN in 2023 on adjusting and reducing the maximum interest rate for short-term loans in VND of credit institutions for borrowers.
Decision 314/QD-NHNN in 2023 is issued by the State Bank of Vietnam on the maximum interest rate for short-term loans in VND of credit institutions for their clients to meet capital needs serving a number of economic sectors and industries as prescribed in Circular 39/2016/TT-NHNN dated December 30, 2016.
Accordingly, the maximum interest rate for short-term loans in VND of credit institutions for their clients to meet capital needs serving a number of economic sectors and industries shall be reduced from 5.5%/year to 5.0%/year;
The maximum interest rate for short-term loans in VND of the People's Credit Fund and microfinance institutions for these capital needs shall be reduced from 6.5 %/year to 6.0 %/year.
The maximum ceiling interest rate for short-term loans in VND for priority sectors shall be reduced to 5.0 %/year to create conditions for enterprises and people in accessing loans at lower costs in priority sectors according to the Government's policy.
This action of the State Bank of Vietnam is conducted after the resolution of the National Assembly, the direction of the Government, the Prime Minister, and the State Bank of Vietnam to administer monetary policy (CSTT) and banking activities firmly, proactively, flexibly, efficiently and harmoniously coordinated, reasonably and closely with fiscal policies and other macroeconomic policies in order to contribute to controlling inflation, stabilizing the macroeconomy and money market, striving to reduce loan interest rates for enterprises and people to support the recovery of economic growth.
On what basis is the loan interest rate between credit institutions and their clients agreed?
Pursuant to the provisions of Clause 1 Article 13 of Circular 39/2016/TT-NHNN as follows:
Loan interest rate
1. A credit institution and its client shall agree on the interest rate depending on capital demands and supplies on the market, loan demands, and creditworthiness of clients unless otherwise stipulated by the State Bank's regulations on the maximum interest rate set forth in Clause 2 of this Article.
2. A credit institution and client shall agree on the interest rate on a short-term loan denominated in Vietnamese dong but shall not allow it to exceed the maximum interest rate decided by the State Bank’s Governor over periods of time in order to meet certain demands for the borrowed fund as follows:
a) Loans taken out to support the agricultural and rural development sector under regulations of the Government on credit policies for agricultural and urban development;
b) Loans taken out to implement the export business plan in accordance with the Law on Commerce and other instructional directives thereof;
c) Loans taken out to finance business activities of small and medium-sized enterprises under the Government’s regulations on support for the development of small and medium-sized enterprises;
d) Loans taken out to develop ancillary industries under the Government’s regulations on the development of ancillary industries;
dd) Loans taken out to finance business operations of high technology application enterprises under the provisions of the Law on High Technology and other instructional directives thereof.
3. Terms and conditions of an agreement on the interest rate shall comprise interest rate levels and methods for calculating the interest rate on a loan. Where the interest rate is not converted into %/year and/or the method for calculating the interest rate based on the actual outstanding amount of debt and time length of maintenance thereof is not applied, the loan agreement must include terms and conditions of the interest rate converted into %/year (one year is calculated as three hundred and sixty-five of days) according to the actual outstanding amount of debt and time length of maintenance thereof.
4. If a client fails to repay or fully repay the agreed amount of loan principal and/or interest at the payment due date, the client shall be obliged to repay loan interest as prescribed hereunder:
a) The amount of interest on the principal is charged at the agreed interest rate in proportion to the period during which repayment of that principal due has not been made;
b) If a client fails to make due payment of interest as prescribed by Point a of this Clause, that client must pay late payment interest charged at the interest rate agreed upon between the credit institution and client which is not allowed to exceed 10%/year interest rate on the outstanding balance of late payment interest in proportion to the period of late payment;
c) Where a debt has become delinquent, the client owing a delinquent debt must pay interest on the outstanding amount of principal which is overdue in proportion to the period of late payment for which the interest rate charged is not allowed to exceed 150% of the interest rate charged on due repayment that is determined upon the date of such debt becoming delinquent.
5. Where the variable interest rate is applied, a credit institution and client must enter into an agreement on principles and factors for determination of the variable interest rate, and on the date of adjustment to the loan interest rate. In cases where referring to factors for determination of the variable interest rate results in different loan interest rates, the credit institution shall apply the lowest loan interest rate.
Accordingly, a credit institution and client shall agree on the interest rate on a short-term loan denominated in Vietnamese dong but shall not allow it to exceed the maximum interest rate decided by the State Bank’s Governor over periods of time in order to meet certain demands for the borrowed fund as follows:
- Loans taken out to support the agricultural and rural development sector under regulations of the Government on credit policies for agricultural and urban development;
- Loans taken out to implement the export business plan in accordance with the Law on Commerce and other instructional directives thereof;
- Loans taken out to finance business activities of small and medium-sized enterprises under the Government’s regulations on support for the development of small and medium-sized enterprises;
- Loans taken out to develop ancillary industries under the Government’s regulations on the development of ancillary industries;
- Loans taken out to finance business operations of high technology application enterprises under the provisions of the Law on High Technology and other instructional directives thereof.
What are the contents of a loan agreement between a credit institution and its client in Vietnam?
Pursuant to Article 23 of Circular 39/2016/TT-NHNN as follows:
The loan agreement must be made in writing, including the following minimum requirements:
+ Name, address, and corporate identity code of the lending credit institution; name, address, and number of identification card or citizen identification card or passport of the client;
+ Loan amount; loan limit for a line of credit loan; provisional credit limit for a provisional line of credit loan; overdraft limit for a current account overdraft facility;
+ Loan purposes;
+ Currency unit used for extending a loan or repaying debt;
+ Lending method;
+ Loan term; duration to maintain the loan limit for a line of credit loan, the effective period of the provisional credit limit for a provisional line of credit loan; duration to maintain the overdraft limit for a current account overdraft facility;
+ Agreed lending interest rate and interest rate converted into a percent (%)/year which is calculated on the basis of the actual amount outstanding and duration of maintenance thereof as prescribed by Clause 3 Article 13 hereof; principles and factors of determination of interest rate, time of determination thereof in case of application of variable interest rate; interest rate charged on the outstanding amount of overdue principal; interest rate charged on late payment interest; type and amount of loan fee applied;
+ Loan disbursement and use of payment instruments for disbursement of borrowed funds;
+ Loan principal and interest repayment, and priority order of recovery of loan principal and interest; early debt repayment;
+ Debt rescheduling; delinquency of the principal amount that a client fails to repay at the agreed due date and the credit institution refuses to agree to reschedule; form and contents of notification of such delinquency referred to in Article 20 of Circular 39/2016/TT-NHNN;
+ Responsibilities of a client for cooperating with the credit institution and providing documents regarding a loan in order for the credit institution to assess an application for and grant a decision to offer a loan, inspect and supervise the use of the borrowed fund, and debt repayment of the client;
+ Cases of loan termination; the collection of debt prior to the due date; delinquency of the principal amount that the client fails to repay prior to the due date in the event of the credit institution's loan termination or collection of debt prior to the due date; form and contents of notification of thereof as prescribed by Clause 1 Article 21 of Circular 39/2016/TT-NHNN;
+ Loan debt treatment; penalty for loan default and compensation for any loss incurred; rights and liabilities of parties involved;
+ Entry into force of a loan agreement.
- In addition to the above provisions, parties can agree on other terms and conditions in compliance with provisions of this Circular and relevant laws.
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