Hanoi, Vietnam: Regulations on credit extension interest rates for customers in Vietnam from July 1, 2024

Regulations on credit extension interest rates for customers in Vietnam from July 1, 2024 (Internet image)

On 28/6/2024, the Governor of the State Bank of Vietnam issued Circular 21/2024/TT-NHNN specifying the business of letter of credit and other business activities related to letter of credits.

Regulations on credit extension interest rates for customers in Vietnam from July 1, 2024

The credit extension interest rates to customers are regulated in Article 12 of Circular 21/2024/TT-NHNN as follows:

• The bank and the customer agree on the interest rates applied to the repayment and negotiation of letter of credit payments.

• The interest rate applied to overdue principal debts in the repayment and negotiation of letter of credit payments is agreed upon by the banks in the credit agreement but does not exceed 150% of the credit interest rate at the time the debt becomes overdue.

• The interest rate applied to the amount the bank pays on behalf of the customer in the issuance, confirmation, and repayment of letter of credits must comply with the credit agreement but does not exceed the highest overdue interest rate currently applied to overdue loans at that bank.

• The interest rate applied to late interest payments will be as agreed upon in the credit agreement for the letter of credit operations, but will not exceed 10% per year based on the outstanding late interest corresponding to the delay period.

• If the currency used in the letter of credit operation is foreign, the parties can agree to charge interest in the foreign currency or convert it into Vietnamese dong or other foreign currencies based on a mutually agreed exchange rate.

Application for credit extension in Vietnam from July 1, 2024

When there is a need for letter of credit services, the customer must send to the bank:

• Information, documents, and data proving the eligibility for credit granting as stipulated in Articles 21, 27, 31, and 40 of Circular 21/2024/TT-NHNN.

• Information about related persons to the customer as stipulated in the Law on Credit Institutions 2024 if the total outstanding credit granted to that customer at the bank (including the application amount) is greater than or equal to 0.1% of the bank's own capital at the latest time, except when the customer is a foreign credit institution. If the bank has negative own capital, the above ratio will be applied based on charter capital or allocated capital (for foreign bank branches). Information about related persons includes:

  • Information about related individuals, including: full name, personal identification number for Vietnamese citizens; nationality, passport number, issuance date, and place of issuance for foreigners; relationship with the customer.

  • Information about related organizations, including: name, business code, head office address, business registration certificate number or equivalent legal documents, legal representative, relationship with the customer.

• Other documents as guided by the bank.

(Article 14 of Circular 21/2024/TT-NHNN)

Regulations on appraisal on credit extension in Vietnam from July 1, 2024

According to Article 15 of Circular 21/2024/TT-NHNN, the regulations on appraisal on credit extension  in Vietnam are as follows:

• The bank assesses the credit eligibility conditions for the customer according to Articles 21, 27, 31, and 40 of Circular 21/2024/TT-NHNN to consider the issuance, confirmation, negotiation of payments, and repayment of the letter of credit. During the assessment process, the bank may use the internal credit rating system, combined with information from the Vietnam National Credit Information Center and other information channels.

• The bank must organize credit approval following the principle of separating responsibilities between the assessment phase and the credit decision phase.

• In case of a decision not to grant credit, the bank will inform the customer of the decision and the reason upon the customer's request.

Nguyen Ngoc Que Anh

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