Lending activities of People's Credit Fund in Vietnam as of July 1, 2024

Lending activities of People's Credit Fund in Vietnam as of July 1, 2024 (Internet image)

Concept of People's Credit Fund

"People's credit fund” means a credit institution voluntarily established by juridical persons, individuals and households as a cooperative with a view to conducting one or some banking operations under the Law on Credit Institutions 2024 for the main purpose of mutual assistance in development of production and business and life.(according to Clause 30, Article 4 of the Law on Credit Institutions 2024).

Operations of people’s credit funds in Vietnam

Article 126 of the Law on Credit Institutions 2024 stipulates the operations of people’s credit funds. include:

- The People's Credit Fund receives deposits in Vietnamese Dong.

- The People's Credit Fund lends in Vietnamese Dong.

- The People's Credit Fund provides money transfer services, performs collection and payment services for its members and customers, except for the opening of payment accounts for customers.

- Other business activities of the People's Credit Fund include:

+ Receiving entrusted funds for loans from organizations and individuals;

+ Acting as an agent providing payment services for the cooperative bank for its members and customers;

+ Borrowing and depositing money at the cooperative bank; borrowing from credit institutions and foreign bank branches. People's Credit Funds are not allowed to lend or deposit money to each other;

+ Participating in capital contributions at the cooperative bank;

+ Opening payment accounts at the State Bank, commercial banks, cooperative banks, and foreign bank branches;

+ Acting as an agent in some areas related to banking operations, asset custody;

+ Acting as an insurance agent according to the law on insurance business, within the scope of insurance agent activities as regulated by the Governor of the State Bank;

+ Advising members on banking activities and other business activities specified in the License.

Lending activities of People's Credit Fund in Vietnam as of July 1, 2024

According to Article 26 of Circular 29/2024/TT-NHNN, the lending activities of People's Credit Funds from July 1, 2024, are implemented as follows:

- The lending activities of People's Credit Funds primarily aim to provide mutual support among members to effectively perform production, business activities, and improve the life of its members.

- People's Credit Funds lend in Vietnamese Dong according to the State Bank's regulations on lending by credit institutions to customers and are responsible for their decisions. People's Credit Funds are not allowed to lend using members' capital contribution certificates as collateral.

- People's Credit Funds lend to members who are legal entities, customers who are legal entities, and individuals who are not members but have deposits at the People's Credit Fund, based on collateral by the deposit balance at the same People's Credit Fund, and the loan term must not exceed the remaining term of the deposit contract or savings book at the same People's Credit Fund.

- People's Credit Funds lend to members of poor households who are registered as permanent residents in the operational area of the People's Credit Fund when the poor household is not a member of the People's Credit Fund. In case multiple members of a poor household simultaneously borrow, all members of the poor household must sign or authorize one member to represent the household in signing the loan agreement with the People's Credit Fund. The poor household must be approved by the district-level People's Committee. The process, procedures, and documentation for lending to members of poor households are carried out according to lending regulations for members.

- People's Credit Funds are not allowed to lend to customers for the purpose of buying or investing in securities.

- People's Credit Funds co-finance loans with the cooperative bank for its members, complying with the law.

Tran Trong Tin

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