Covid-19 Pandemic: Under What Circumstances Can Banks Retain the Original Loan Classification?

12:12, 10/07/2024

The maintenance of the debt group to support customers affected by the Covid-19 pandemic is regulated in Circular 01/2020/TT-NHNN on the restructuring of debt payment terms, exemption, reduction of interest rates, fees, and maintenance of the debt group to support customers affected by the Covid-19 pandemic for credit institutions and branches of foreign banks.

Maintain the debt group, 01/2020/TT-NHNN

Illustrative Image (Source: Internet)

To be specific:, at Circular 01/2020/TT-NHNN, regulations stipulate that credit institutions and foreign bank branches are allowed to maintain the debt groups classified according to the provisions of the State Bank of Vietnam at the nearest point in time before January 23, 2020 for the following outstanding debts:

- Outstanding debts with restructured repayment terms as stipulated in Article 4 of Circular 01/2020/TT-NHNN;- Outstanding debts exempted or reduced in interest as stipulated in Article 5 of this Circular;- Outstanding debts stipulated in points a, b of this clause also include outstanding debts that have been restructured in terms, exempted, reduced interest, and adjusted in debt groups according to the provisions of the State Bank of Vietnam from January 23, 2020 to the consecutive day after 15 (fifteen) days from the effective date of this Circular.

For the above-mentioned outstanding debts, credit institutions and foreign bank branches must categorize debts and set up provisions for risks within the restructured term according to the legal provisions on debt classification, provisioning, and use of provisions to handle risks in the operations of credit institutions and foreign bank branches, but without applying the principle of adjusting to a higher risk group.

For the interest receivable on the outstanding debts that have been restructured in payment terms, exempted or reduced in interest, and maintained in the standard debt group (group 1) as stipulated in this Circular, from the date of restructuring, credit institutions and foreign bank branches do not have to account for income (accrued interest) but must follow off-balance to expedite collection; account into income when collected according to the legal provisions on financial policies for credit institutions and foreign bank branches.

Details can be found at Circular 01/2020/TT-NHNN, effective from March 13, 2020.

Le Hai

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