Vietnam: What is the loan interest rate of banks? In what cases will the loan interest rate be controlled?
What is the loan interest rate of banks in Vietnam?
According to the provisions of Clause 1, Article 13 of Circular 39/2016/TT-NHNN on loan interest rate as follows:
- A credit institution and its customer shall agree on the interest rate depending on capital demands and supplies on the market, loan demands and creditworthiness of customers, unless otherwise stipulated by the State Bank's regulations on the maximum interest rate set forth in Clause 2 of this Article.
In what cases will the loan interest rate in Vietnam be controlled?
Pursuant to Clause 2, Article 13 of Circular 39/2016/TT-NHNN as follows:
- A credit institution and customer shall agree on the interest rate on 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 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 development of small and medium-sized enterprises;
+ Loans taken out to develop ancillary industries under the Government’s regulations on 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.
- 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.
- If a customer fails to repay or fully repay the agreed amount of loan principal and/or interest at the payment due date, the customer shall be obliged to repay loan interest as prescribed hereunder:
+ The amount of interest on principal is charged at the agreed interest rate in proportion to the period during which repayment of that principal due has not been made;
+ If a customer fails to make due payment of interest as prescribed by Point a of this Clause, that customer must pay late payment interest charged at the interest rate agreed upon between the credit institution and customer 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;
+ Where a debt has become delinquent, the customer 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.
- Where the variable interest rate is applied, a credit institution and customer 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.
When will credit institutions in Vietnam grant decisions to offer loans?
Pursuant to Article 17 of Circular 39/2016/TT-NHNN as follows:
- The credit institution shall assess the customer's ability to satisfy loan requirements as prescribed by Article 7 hereof in order to consider granting a decision to offer a loan. In the course of such assessment, the credit institution can use the internal credit rating system associated with information available at the National Credit Information Center of Vietnam and other communications channels.
- The credit institution must establish loan approval procedures according to the principle of assignment of responsibilities in the assessment and decision-making stages.
- In the event of refusal to offer a loan, the credit institution shall notify the customer submitting the loan application of reasons for such rejection.
What are the contents of loan agreements between credit institutions and customers in Vietnam?
According to the provisions of Article 23 of Circular 39/2016/TT-NHNN on the 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, number of identification card or citizen identification card or passport of the customer;
+ 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, effective period of 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 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 instrument 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 customer 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 hereof;
+ Responsibilities of a customer for cooperating with the credit institution and providing documents regarding a loan in order for the credit institution to assess application for and grant a decision to offer a loan, inspect and supervise use of borrowed fund and debt repayment of the customer;
+ Cases of loan termination; collection of debt prior to the due date; delinquency of the principal amount that the customer 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 hereof;
+ 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 contents, the parties may agree on other contents in accordance with the provisions of this Circular and relevant laws.
- The loan agreements shall be established in the form of either a specific loan arrangement, or both framework and specific arrangement.
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