Conditions for considering approval of a bank's credit limit extension in Vietnam

Conditions for considering approval of a bank's credit limit extension in Vietnam​ (Image from the Internet)

The Prime Minister of the Government of Vietnam issued Decision 09/2024/QD-TTg on July 1, 2024, which stipulates conditions, documentation, and procedures for requesting approval for credit limit extension of credit institutions and branches of foreign banks.

1. Conditions for considering approval of a bank's credit limit extension in Vietnam

According to Article 3 of Decision 09/2024/QD-TTg, the conditions for considering approval of credit limit extension in Vietnam for credit institutions and branches of foreign banks are as follows:

- Borrowers, projects, and plans proposed for extending credit beyond the limit must meet the following conditions:

+ The borrower meets all legal requirements for credit extension, has no bad debt at any credit institution for 3 consecutive years prior to the request for credit extension beyond the limit, and has a debt-to-equity ratio as recorded in the latest financial report not exceeding three times the equity;

+ The borrower needs capital to implement projects and production and business plans to fulfill national socio-economic tasks under the following cases:

Implementing projects with significant socio-economic importance to meet essential needs in areas such as electricity, coal, petroleum, oil, transportation, public transportation, and other sectors as directed by the Government of Vietnam and the Prime Minister of the Government of Vietnam;

Implementing investment programs and projects decided by the National Assembly or the Prime Minister of the Government of Vietnam;

Investing in prioritized sectors encouraged by the Resolution of the National Assembly and Government of Vietnam on socio-economic development.

+ The project or plan proposed for credit extension beyond the limit has been evaluated and deemed feasible by the credit institution, the borrower has the ability to repay the debt, and the decision for credit extension has been made; it complies with current regulations on investment and construction, aligns with the business production plan, and has been approved or issued an investment registration certificate by the competent authority.

- The credit institution must meet the following conditions:

+ Regarding syndicated credit:

The necessary procedures for syndicated credit according to the law have been proposed and implemented for projects that require it and the syndication capacity of the credit institutions has not met the borrower’s requirements; or

A syndication invitation letter has been sent to at least 5 other credit institutions, published on the official websites of the credit institution and the State Bank of Vietnam, or on financial publications, for at least 45 days but no other credit institutions participated in the syndication.

+ At the time of the request for credit extension beyond the limit, the credit institution meets safety ratio requirements according to the Law on Credit Institutions 2024 and guidance documents of the State Bank of Vietnam;

+ Fulfillment of all related responsibilities and obligations stated in the documents requesting the credit extension beyond the limit and previous approval documents;

+ Compliance with the credit limit regulations in Clause 8 of Article 136 of the Law on Credit Institutions 2024 when considering the proposed credit extension beyond the limit.

2. Documentation for requesting a bank's credit limit extension in Vietnam

The documentation for requesting credit extension of credit institutions and branches of foreign banks is specified in Article 4 of Decision 09/2024/QD-TTg as follows:

* Documents submitted by the credit institution to the State Bank of Vietnam:

The documentation for extending credit beyond the limit for a customer or related customers submitted to the State Bank of Vietnam includes original copies, certified copies, or copies with the credit institution’s seal, including:

- The credit institution’s request to the State Bank of Vietnam to report to the Prime Minister of the Government of Vietnam to permit extending credit beyond the limit for a customer or related customers according to the form in the appendix attached to Decision 09/2024/QD-TTg;

+ Documents proving the credit institution meets the conditions specified in point a of Clause 2, Article 3 of Decision 09/2024/QD-TTg;

+ Documents evaluating the borrower, project, or capital plan of the borrower;

+ The credit decision documents approved by the competent authorities of the credit institution;

+ The borrower’s request for credit extension at the credit institution;

+ Related documents of the borrower requesting credit extension, including: Business registration certificate or Establishment certificate; audited financial reports of the preceding 3 years; other relevant documents (if any);

+ Legal documents related to the project or plan for which credit extension is requested, including:

++ Investment registration certificate or the approval, acceptance document of the project/plan by the competent authority;

++ Other relevant documents.

+ A report on the credit situation and the need to extend credit beyond the limit for a customer or related customers as per Form No. 01 in the appendix attached to Decision 09/2024/QD-TTg.

* Documents for the State Bank of Vietnam to report to the Prime Minister of the Government of Vietnam include the following:

- The credit institution’s request to the State Bank of Vietnam to report to the Prime Minister of the Government of Vietnam to permit extending credit beyond the limit for a customer or related customers;

- Comments from related ministries, central authorities, and local authorities;

- Explanatory documents from the credit institution or the borrower (if any);

- Other relevant documents (if any).

More details can be found in Decision 09/2024/QD-TTg, effective from July 1, 2024, replacing Decision 13/2018/QD-TTg.

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