Vietnam: Debt restructuring, charge-off and grant of new loans

Specifically, according to Clause 6 Article 1 of Decree No. 116/2018/ND-CP of Vietnam’s Government, which amends and supplements Article 12 of Decree No. 55/2015/ND-CP, new regulations on debt restructuring, charge-off and grant of new loans are as follows:

- Where customers have yet to make timely debt repayments to credit institutions due to force majeure, credit institutions shall consider whether debt repayments are rescheduled and customers’ debt groups are kept unchanged; concurrently, take into account the feasibility of the production and business project or plan, debt repayment capability to consider granting new loans to customers in order for them to deal with their difficulties, stabilize their production as well as repay previous or current debts to credit institutions.

- In case the customer suffers loss of their loans or loan-derived assets due to a large-scale natural disaster or an epidemic or force majeure event or other causes not by faults of such customers as prescribed in Clause 3 Article 14 and Clause 3 Article 15 of Decree No. 55/2015/ND-CP and is considered not yet or not capable to repay debts to the credit institution, such credit institution shall consider to charge-off debts without interest payment within 2 years upon consideration of the consolidated report on customer’s losses submitted to the Prime Minister, State Bank of Vietnam and the Ministry of Finance by People’s Committees of provinces and centrally-affiliated cities (hereinafter referred to as “provinces”).

As for cases specified in Clause 3 Article 14 and Clause 3 Article 15 of Decree No. 55/2015/ND-CP, the charge-off duration must not exceed 3 years. The categories of charge-off debts shall remain unchanged. Loss from uncollectible interests of the credit institution due to debt charge-off will be covered by the local government budget.

If the local government budget is not sufficient to cover such loss, the provincial People's Committee shall send a report to the Ministry of Finance, which will cooperate with the State Bank of Vietnam and Ministry of Planning and Investment in reporting to the Government for considering providing assistance from provision for central government budget.

- Application and procedure for charge-off

+ An application for debt charge-off consists of:

(i) A written notification of the large-scale natural disaster or epidemic prepared by provincial People’s Committee in case natural disasters or epidemics break out;

(ii) An application form for debt charge-off prepared by the customer;

(iii) Documents proving the customer has an outstanding loan, including a copy of loan agreement and loan note;

(iv) A record on customer’s loss of loans and loan-derived assets which specifies the rate of loss due to the large-scale natural disaster or epidemic, force majeure event or other causes not by faults of the customer and is signed by the credit institution, the customer and competent authority;

(v) A report on appraisal of loss, solvency of the customer, business plan, debt repayment plan after charge-off period and proposal of debt charge-off period made by the branch of credit institution and people's credit funds.

+ Procedure for debt charge-off

(i) The branch of credit institution and people’s credit fund shall cooperate with the applicant in making and sending a list of applicants to the Department of Finance and provincial branch of the State Bank within 30 days from the day on which the written notification of the large-scale natural disaster or epidemic prepared by provincial People’s Committee is received or the day on which the loss is incurred;

(ii) The provincial branch of the State Bank shall take charge and cooperate with the Department of Finance in checking and certifying legality of the application, data and sending a list of applicants to provincial People’s Committees for the purpose of certifying and making a report which is submitted to the State Bank of Vietnam and Ministry of Finance together with the application for debt charge-off within 15 days from the day on which the application for debt charge-off and the list of applicants from branches of credit institution and people's credit funds are received;

(iii) The branch of credit institution shall send a consolidated report on documents specified above to the head office for verification and application within 15 days from the day on which the list of applicants is certified by the provincial People's Committee; upon consideration of the inspection result, the head office of credit institution shall make a list of applicants and send it along with documents provided in the application to the State Bank of Vietnam and Ministry of Finance for considering whether to grant permission for debt charge-off;

(iv) The State Bank of Vietnam shall take charge and cooperate with the Ministry of Finance in considering whether to grant permission for debt charge-off or ask for approval from Prime Minister as per provisions in Clause 4 this Article within 30 days from the day on which the satisfactory application specified in item (ii) and (iii) Point b Clause 3 Article 12 of Decree No. 55/2015/ND-CP.

- The State Bank of Vietnam shall take charge and cooperate with the Ministry of Finance in considering whether to grant permission for debt charge-off if the amount of debt subject to charge-off in case of a natural disaster or epidemic or force majeure event or other causes not by faults of the customers as specified in Clause 3 Article 14 and Clause 3 Article 15 of Decree No. 55/2015/ND-CP is equal to or less than VND 1 billion or sending a report to the Prime Minister for approval if such amount is greater than VND 1 billion.

For the case in which the State Bank of Vietnam and the Ministry of Finance fail to reach a mutual agreement on debt charge-off in case the amount of debt subject to such charge-off is equal to or less than VND 1 billion, the State Bank of Vietnam shall send a report to the Prime Minister for consideration and approval purpose.

View more details: Decree No. 116/2018/ND-CP of Vietnam’s Government takes effect from October 25, 2018.

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