Vietnam: Are the banks entitled to debt rescheduling and retention of debt category until the end of June 30, 2024 to assist borrowers in difficulties?
- Circular No. 02/2023/TT-NHNN on debt rescheduling and retention of debt category to assist borrowers in difficulties until the end of June 30, 2024?
- How to carry out repayment deadline extension and retention of debt category to assist borrowers in difficulties until the end of June 30, 2024?
- What are the regulations on retention of debt category and debt classification to assist borrowers in difficulties?
Circular No. 02/2023/TT-NHNN on debt rescheduling and retention of debt category to assist borrowers in difficulties until the end of June 30, 2024?
In order to implement the Government's direction in Resolution No. 50/NQ-CP in 2023 and Resolution No. 59/NQ-CP in 2023, on April 23, 2023, the Governor of the State Bank of Vietnam hereby promulgates a Circular providing instructions for credit institutions and foreign branch banks on debt rescheduling and retention of debt category to assist borrowers in difficulties.
According to that, the banks consider and decide to restructure the repayment term for the principal and/or interest balances of the debt on the basis of the borrower's request, the bank's financial capacity and ensure some following regulations:
- Debts rescheduling and retention of debt category are principal balances arising before April 24, 2023 and from lending and financial leasing activities.
The State Bank empowers banks to take the initiative in reviewing and assessing borrowers' difficulties in order to decide on the restructuring of their borrowers' loans.
- Having an obligation to repay principal and/or interest in the period from April 24, 2023 to the end of June 30, 2024.
- The time for rescheduling the repayment term shall be decided by the bank but must not exceed 12 months from the due date of the debt balance subject to the rescheduled repayment term.
- The rescheduling of debt repayment period for borrowers according to the provisions of Circular No. 02/2023/TT-NHNN is implemented from April 24, 2023, effective until the end of June 30, 2024.
According to the State Bank of Vietnam, the policy of repayment deadline extension and retention of debt category according to Circular No. 02/2023/TT-NHNN will contribute directly to removing difficulties for people and businesses, prolonging the loan period and repaying bank loans.
At the same time, create conditions for businesses and people to continue to cycle capital and access new loans for production, business, life and consumption, thereby contributing to production development, promoting economic development according to the set targets of 2023 and the whole period of 2021-2025.
Vietnam: Are the banks entitled to debt rescheduling and retention of debt category until the end of June 30, 2024 to assist borrowers in difficulties?
How to carry out repayment deadline extension and retention of debt category to assist borrowers in difficulties until the end of June 30, 2024?
Pursuant to Article 4 of Circular No. 02/2023/TT-NHNN providing instructions for credit institutions and foreign branch banks on debt rescheduling and retention of debt category to assist borrowers in difficulties as follows:
A credit institution or foreign branch bank may consider rescheduling outstanding debt, including the principal and/or interest (including the debts regulated by the Government's Decree No. 55/2015/ND-CP dated June 09, 2015 on credit policies serving development of agriculture and rural areas (with amendments)) on the basis of borrowers’ requests, its financial capacity and compliance with the following regulations:
Firstly, the outstanding debt is principal of a loan granted before the effective date of Circular No. 02/2023/TT-NHNN, and from lending and finance lease.
Secondly, the principal and/or interest have to be paid within the period from the effective date of Circular No. 02/2023/TT-NHNN to June 30, 2024 inclusive.
Thirdly, the outstanding debt to be rescheduled is undue or up to 10 (ten) days overdue according to the loan/finance lease agreement.
Fourthly, the credit institution or foreign branch bank determines that the borrower is unable to repay the principal and/or interest on schedule under the signed agreement due to decrease in revenue or income compared to that specified in the principal and/or interest repayment plan under the signed agreement.
Fifthly, the credit institution or foreign branch bank determines that the borrower is able to fully repay the principal and/or interest after the debt is rescheduled.
Sixthly, debts that violate regulations of law shall not be rescheduled.
Seventhly, rescheduling time (including repayment deadline extension) shall vary according to the degree of difficulty facing the borrower and shall not exceed 12 months from the due date of the outstanding debt to be rescheduled.
Eighthly, debt rescheduling under regulations of Circular No. 02/2023/TT-NHNN shall be carried out from the effective date of Circular No. 02/2023/TT-NHNN to June 30, 2024 inclusive.
What are the regulations on retention of debt category and debt classification to assist borrowers in difficulties?
Pursuant to Article 5 of Circular No. 02/2023/TT-NHNN stipulating this issue as follows:
- Credit institutions and foreign branch banks may retain the debt categories with respect to the debt whose principal and/or interest has been rescheduled (hereinafter referred to as “rescheduled debt”) under regulations of Circular No. 02/2023/TT-NHNN in the same manner as the debt categories that have been assigned in accordance with State Bank of Vietnam Governor’s regulations on classification of assets, rates and methods of making loan loss provision and use of loan loss provision for handling of risks arising from operations of credit institutions and foreign branch banks at the nearest time before prior to the debt rescheduling according to regulation of Circular No. 02/2023/TT-NHNN.
- After debt rescheduling and retention of debt categories are carried out as prescribed in clause 1 of this Article within the time limit for rescheduling, credit institutions and foreign branch banks are not required to put these debts into a higher-risk category according to State Bank of Vietnam Governor’s regulations on classification of assets, rates and methods of making loan loss provision and use of loan loss provision for handling of risks arising from operations of credit institutions and foreign branch banks.
- If the outstanding debts after rescheduling and retention of debt categories prescribed in clause 1 Article 5 of Circular No. 02/2023/TT-NHNN are not granted another debt rescheduling by the credit institution or foreign branch bank according to regulations, the credit institution or foreign branch bank shall carry out debt classification in accordance with State Bank of Vietnam Governor’s regulations on classification of assets, rates and methods of making loan loss provision and use of loan loss provision for handling of risks arising from operations of credit institutions and foreign branch banks.
- From the rescheduling date, credit institutions and foreign branch banks shall not record the interests on the outstanding debts that are rescheduled and debts that remain current non-performing loans (Category 1) as prescribed in Circular No. 02/2023/TT-NHNN as revenue (estimated). Instead, they shall be monitored off-balance sheet and recorded as revenue when they are collected in accordance with regulations of law on financial regimes applicable to credit institutions and foreign branch banks.
Circular No. 02/2023/TT-NHNN takes effect from April 24, 2023.
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