Rules for factoring by banks in Vietnam from July 1, 2024

Rules for factoring by banks in Vietnam from July 1, 2024 (Internet image)

On June 27, 2024, the Governor of the State Bank of Vietnam issued Circular 20/2024/TT-NHNN on  factoring and other related services provided by credit institutions and foreign bank branches.

Rules for factoring by banks in Vietnam 

• The factoring unit implements factoring based on compliance with the Law on Credit Institutions 2024, relevant legal regulations, and the License issued by the State Bank of Vietnam (hereinafter referred to as the State Bank).

• The factoring unit conducts factoring in foreign currency within the scope of its business, providing foreign exchange services in the domestic and international markets according to relevant legal regulations.

• The factoring unit adheres to regulations on cases where credit cannot be granted, credit granting restrictions, and credit granting limits under the Law on Credit Institutions and the State Bank's regulations on safety limits and ratios in the operations of credit institutions and foreign bank branches.

• Syndicated factoring is implemented according to Circular 20/2024/TT-NHNN, the State Bank's regulations on syndicated credit granting to customers, current regulations on overseas borrowing and debt repayment, and relevant legal regulations. In cases of syndicated factoring involving foreign credit institutions and customers who are residents, the Vietnamese factoring unit participates only when the customer complies with foreign exchange management regulations on overseas borrowing and debt repayment by enterprises.

• International factoring is implemented according to Circular 20/2024/TT-NHNN. In cases of overseas lending and debt recovery in international factoring, the factoring unit complies with foreign exchange management regulations on overseas lending and debt recovery.

• Foreign bank branches may provide factoring for buyers or sellers who are non-residents and meet the conditions stipulated in points c, d, đ clause 1, and point b clause 2 Article 11 of Circular 20/2024/TT-NHNN.

(Article 4 of Circular 20/2024/TT-NHNN)

Cases where banks reject factoring in Vietnam 

The factoring unit cannot provide factoring for receivables in the following cases:

• Arising from a contract for the purchase, sale of goods, provision of services prohibited by law.

• Arising from a contract for the purchase, sale of goods, provision of services with a remaining term of the receivable of 01 year or more from the date of receiving the factoring request.

• Arising from a contract for the purchase, sale of goods, provision of services with an agreement prohibiting the transfer of rights and obligations in the contract.

• Arising from a contract for the provision of services in the financial, banking, and insurance sectors according to the Prime Minister's regulations on Vietnam's economic sector system.

• Already factored or used as security for other debt obligations (except where the factoring amount does not exceed the value of the receivable after deducting the value already factored and used as security for other debt obligations).

• Overdue payment under the contract for the purchase, sale of goods, provision of services.

• Involved in a dispute regarding the performance of the contract for the purchase, sale of goods, provision of services.

(Article 7 of Circular 20/2024/TT-NHNN)

More details can be found in Circular 20/2024/TT-NHNN, which comes into force from July 1, 2024.

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