What are regulations on interest rate and term of State investment credit loans from December 22, 2023 in Vietnam?

What are regulations on interest rate and term of State investment credit loans from December 22, 2023 in Vietnam?

According to the provisions of Article 8 of Decree 33/2017/ND-CP, amended by Clause 7, Article 1 of Decree 78/2023/ND-CP (effective from December 22, 2023), deadline for State investment credit loans will be decided by the Vietnam Development Bank based on the following grounds:

- Project appraisal results;

- Production and business characteristics;

- Capital recovery ability of each project and customer repayment ability.

Regarding interest rates for State investment credit loans (specified in Article 9 of Decree 33/2017/ND-CP amended by Clause 8, Article 1 of Decree 78/2023/ND-CP)

The interest rate for State investment credit loans is decided by the Vietnam Development Bank, ensuring the principle of being sufficient to offset the cost of capital mobilization, operating expenses of the apparatus and the cost of setting up risk provisions for with loans signed in credit contracts from December 22, 2023, but not lower than 85% of the average lending interest rate of domestic commercial banks in the same period;

The state budget does not subsidize interest rates and management fees for these loans.

In addition, for the entire overdue principal balance of each loan:

+ Overdue interest rate is considered and decided by Vietnam Development Bank, maximum equal to 150% of current loan interest rate;

+ The lending interest rate within the above term is adjusted according to the State's investment credit lending interest rate decided by the Vietnam Development Bank according to the order of deciding the State's investment credit lending interest rate.

What are regulations on interest rate and term of State investment credit loans from December 22, 2023 in Vietnam? (Image from the Internet)

What are the conditions for receiving State investment credit?

In Article 6 of Decree 33/2017/ND-CP amended by Clause 3 and 4, Article 1 of Decree 78/2023/ND-CP (effective from December 22, 2023), there are conditions for State investment credit loans are:

- Belong to customers whose investment projects are on the List of projects eligible for State investment credit loans;

- Have full legal capacity and carry out investment procedures according to regulations.

- Have an investment project applying for a loan that has been appraised and evaluated by the Vietnam Development Bank as an effective project; have financial capacity to repay debt at the time the Vietnam Development Bank considers and decides to lend.

- Equity capital participating in the project implementation process is at least 20% of the total investment capital of the project (excluding working capital), the specific level will be considered and decided by the Vietnam Development Bank in accordance with the investor's financial capacity and the project's debt repayment plan.

- Implement loan guarantees according to the provisions of Decree 32/2017/ND-CP and the provisions of law.

- Customers do not have bad debt at credit institutions or foreign bank branches at the time the Vietnam Development Bank considers and decides to lend.

What is the State's investment credit lending currency in Vietnam?

In Article 10 of Decree 33/2017/ND-CP, there are regulations on loan currency as follows:

Loan currency

1. Loans shall be provided and recovered in Vietnam dong.

2. For ODA-funded projects and foreign loan-funded projects, the Vietnam Development Bank may provide and recover loans in a foreign currency in accordance with regulations on the mechanism of on-lending the Government’s foreign loans and the State Bank of Vietnam’s guidance.

Thus, the State's investment credit lending currency is Vietnam Dong.

For ODA-funded projects and foreign loan-funded projects, loans are allowed in foreign currency.

What are procedures for deciding interest rates on investment credit loans of the State in Vietnam?

In Clause 2, Article 9 of Decree 32/2017/ND-CP amended by Clause 8, Article 1 of Decree 78/2023/ND-CP (effective from December 22, 2023), there is a regulation on the decision on  State investment credit lending interest rates are implemented as follows:

Step 1: Before January 25 every year, the State Bank of Vietnam sends a document to the Ministry of Finance providing average lending interest rate data of domestic commercial banks in the same period for the Ministry of Finance to provide to the Vietnam Development Bank;

Step 2: No later than 03 working days after receiving the document from the State Bank of Vietnam in Step 1, the Ministry of Finance shall send a document to the Vietnam Development Bank with the average lending interest rate data of the domestic commercial banks in the same period provided by the State Bank of Vietnam;

Step 3: No later than 03 working days after receiving the document from the Ministry of Finance in Step 2, based on the principles of determining the interest rate for investment credit loans of the State, the Vietnam Development Bank decides interest rates for State investment credit loans;

Step 4: In case the lending interest rates of domestic commercial banks have large fluctuations during the year:

The Vietnam Development Bank reported to the Ministry of Finance to send a document to the State Bank of Vietnam requesting to provide the average lending interest rates of domestic commercial banks at the time of request, let the Vietnam Development Bank decide on the interest rate for State investment credit loans.

Note: The interest rate for State investment credit loans decided by the Vietnam Development Bank above is applied to all outstanding outstanding loans and new disbursements of investment credit loan contracts signed from December 22, 2023.

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