What Requirements Must a People's Credit Fund Meet When Lending to the Fund's Director?

According to the provisions of Article 8 Circular 32/2015/TT-NHNN, the People's Credit Fund is not allowed to grant unsecured loans, preferential loans (preferential in terms of interest rates, documents, procedures for loan approval, security measures for debt obligations, and debt recovery measures compared to those provided by law and internal regulations on lending activities and loan management) to the following subjects:

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- Members of the Board of Directors, Supervisory Board, Director, Deputy Director, Chief Accountant of the People's Credit Fund;- Auditing organizations, auditors currently auditing and inspectors currently inspecting at the People's Credit Fund;- Enterprises with more than 10% of charter capital owned by any of the subjects specified in point (a) of this clause;- Appraisers, loan approvers of the People's Credit Fund.

According to Clause 2, Article 4 of Circular 21/2019/TT-NHNN amending and supplementing Point (c), Clause 2, Article 8 of Circular 32/2015/TT-NHNN dated December 31, 2015 on limits and safety ratios in the operation of People's Credit Funds, for loans to the aforementioned subjects, the People's Credit Fund must ensure the following requirements:

- The total outstanding loan amount shall not exceed 5% of the equity of the People's Credit Fund;- The lending must be approved by the Board of Directors and publicly disclosed within the People's Credit Fund;- Report to the State Bank's provincial and city branches when a loan arises;- Report to the General Assembly of Members on the loan arising up to the point of data collection for the General Assembly of Members meeting.

Thus, when the People's Credit Fund lends to its Director, the above conditions must be met.

Additionally, this Circular stipulates that the total outstanding loan amount to a legal member shall not exceed the total contributed capital and the deposit balance of that legal entity at the People's Credit Fund at any time. The loan term for a legal member shall not exceed the remaining term of the deposit and the loan must be secured by the deposit balance of the legal entity at the People's Credit Fund. The total outstanding loan amount to customers who are legal entities or individuals who are not members shall not exceed the balance of the deposit contract, savings book, and the loan term shall not exceed the remaining term of the deposit contract, savings book.

See additional regulations in Circular 21/2019/TT-NHNN effective from January 1, 2020.

Thu Ba

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