The Prime Minister of the Government of Vietnam has just issued a Draft Decision on the mechanism for interest rate compensation discrepancies due to the implementation of credit policies under Decree 100/2015/ND-CP on the development and management of social housing. The decision specifically stipulates the subjects as well as the conditions for the state to provide interest rate compensation discrepancies...
Article table of contents
Conditions for Credit Institutions to Receive Interest Rate Differential Compensation
Loans will be subsidized by the state budget for interest rate differentials when they meet the following conditions:
- A credit contract has been signed, and loan funds have been disbursed at credit institutions in accordance with Decree 100/2015/ND-CP and guidelines from the State Bank of Vietnam.- The borrower is the appropriate target group, and loans are used for the purposes stipulated by law.- The loan is current at the time of receiving the interest rate differential compensation.
Interest rate differential compensation will not be provided for overdue loan periods or loan extensions for loans (both principal and interest) that are overdue or have been extended (except for loans that face risks due to objective reasons or force majeure and have been extended according to regulations).
Customers will continue to receive interest rate differential compensation according to Decree 100/2015/ND-CP and the guidelines in this Decision if the borrower has paid off the overdue debt, and the loan is reclassified as current (the borrower repaying debt on time starting from the next repayment period).
Propose Two Options for Regulations on Interest Rate Differential Compensation
The draft has proposed two options for regulations on the interest rate differential compensation for loans for social housing investment and for loans to buy, rent, or lease-purchase social housing; new construction or renovation, repair of residential housing. These two methods differ in how the reference interest rate is determined.
The two methods to determine the reference interest rate include:
- Option 01: The reference lending interest rate is the lowest lending interest rate for the agricultural and rural sector with the same term within the same period of each credit institution.- Option 02: The reference lending interest rate is the maximum short-term lending interest rate in Vietnamese Dong of credit institutions for borrowers to meet capital needs for certain sectors as announced by the State Bank of Vietnam (SBV).
The interest rate differential compensation is determined as follows:
- Option 1:- For loans for social housing investment: The interest rate differential compensation is calculated as the lowest lending interest rate for the agricultural and rural sector with the same term within the same period of the credit institution minus the lending interest rate stipulated in point b, clause 7, Article 15 of Decree 100/2015/ND-CP.- For loans to buy, rent, or lease-purchase social housing; new construction or renovation, repair of residential housing: The interest rate differential compensation is calculated as the lowest lending interest rate for the agricultural and rural sector with the same term within the same period of the credit institution minus the interest rate stipulated in point b, clause 5, Article 16 of Decree 100.
In cases where credit institutions do not have specified interest rates for loans with a corresponding long-term loan duration to the actual loan term, in accordance with Decree 100/2015/ND-CP, to determine the interest rate differential compensation, credit institutions use the lending interest rate applied to loans in the agricultural and rural sector with the closest shorter loan term to the actual loan term.
- Option 2:- For loans for social housing investment: The interest rate differential compensation is calculated as the maximum short-term lending interest rate in Vietnamese Dong of credit institutions for borrowers to meet capital needs for certain sectors as announced by SBV minus the lending interest rate stipulated in point b, clause 7, Article 15 of Decree 100.- For loans to buy, rent, or lease-purchase social housing; new construction or renovation, repair of residential housing: The interest rate differential compensation is calculated as the maximum short-term lending interest rate in Vietnamese Dong of credit institutions for borrowers to meet capital needs for certain sectors as announced by SBV minus the interest rate stipulated in point b, clause 5, Article 16 of Decree 100.
See full details in the Draft.
