Vietnam: Increasing the time limit of lending between credit institutions and branches of foreign banks

According to Vietnam’s current regulations, credit institutions, branches of foreign banks are entitled to perform lending and borrowing from each other to cover a temporary shortage of compulsory reserves, affordability and ability of capital business on the basis of capital source balance and capital use, assurance of business effectiveness and operation safety for Credit institutions, branches of foreign banks.

Clause 8 Article 1 of Circular No. 01/2013/TT-NHNN of the State Bank of Vietnam amends the regulation on time limit of lending. Specifically, time limit of lending among credit institutions, branches of foreign banks is under 01 year maximally, unless credit institutions perform lending for financial leasing companies being subsidiary companies of those credit institutions.

Circular No. 01/2013/TT-NHNN also stipulates that all transactions for lending, borrowing done must be made in lending contracts. The lender and the borrower may sign a lending contract for each transaction or sign a master contract generally applicable to all lending transactions and borrowing among two parties as agreed in principle in line with international practice and not contrary to the law of Vietnam. Specifically, the lending contract includes the following basic contents:

- The lender;

- The borrower;

- Date of contract performance;

- Contents of the contract;

- Mode of contract performance;

- Value of the loan;

- Interest rates on loans;

- Loan term;

- Form of loan security (if any);

- Mode of payment;

- Rights and obligations of the parties;

- Provisions on adjustment of the contract during the performance;

- Provisions on dispute settlement, overdue sanction, handling of security assets, extension of the contract term;

- Other agreements related to the loans of the parties.

View relevant provisions at Circular No. 01/2013/TT-NHNN of the State Bank of Vietnam, effective from January 07, 2013.

Thu Ba

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