Lending conditions of state investment loans in Vietnam

Lending conditions of state investment loans in Vietnam (Internet image)

1. Eligible borrowers of state investment loans in Vietnam

According to Article 5 of Decree 32/2017/ND-CP, eligible borrowers of state investment loans in Vietnam include:

(1) Eligible for state investment loans are clients having investment projects on the list of projects eligible for state investment loans issued together with Decree 32/2017/ND-CP.

(2) A project mentioned in (1) that has borrowed preferential loans from other state financial institutions may not borrow state investment loans under Decree 32/2017/ND-CP.

2. Lending conditions of state investment loans in Vietnam

According to Article 6 of Decree 32/2017/ND-CP, a borrower must fully satisfy the following conditions:

- Being specified in Article 5 of Decree 32/2017/ND-CP.

- Having full legal capacity and having carried out the prescribed investment procedures.

- Having its investment project in need of a state investment loan appraised and evaluated by the Vietnam Development Bank as being efficient and capable of repaying the loan.

- Having an equity capital for the project implementation equal to at least 20% of the total project investment capital.

The specific level shall be considered and decided by the Vietnam Development Bank to suit the financial capability of the project owner and conform to the project’s debt payment plan, except for special projects decided by the Prime Minister.

- Providing loan security under Decree 32/2017/ND-CP and relevant regulations.

- Having no non-performing loan owed to any credit institutions by the time the Vietnam Development Bank considers the provision and disbursement of a loan.

- Having purchased property insurance from an insurance business lawfully operating in Vietnam for the loan security property.

- Observing the regulations on accounting, annual financial statements and audit of annual financial statements in accordance with law.

3. Loan limit of state investment credit in Vietnam

The loan amount and loan limit are regulated as follows:

(i) The maximum state investment loan for a project is 70% of the total investment capital of such project (excluding liquid capital).

(ii) The total outstanding loan balance of the Vietnam Development Bank (including state investment loans) for a borrower, and for a borrower and its affiliated persons, except for special projects decided by the Prime Minister, must not exceed 15% and 25% of the Bank’s equity capital, respectively.

(iii) The Vietnam Development Bank may decide on a specific loan amount to be provided for an investment project based on the project’s appraisal result and the credit limit specified in (i) and (ii).

(Article 7 of Decree 32/2017/ND-CP)

4. Loan terms of state investment credit in Vietnam

According to Clause 1, Article 8 of Decree 32/2017/ND-CP, the loan terms shall be determined according to the capital recoverability of projects and debt payment ability of borrowers to suit production or business characteristics of projects but must not exceed 12 years. Particularly for group-A investment projects, the maximum loan term is 15 years.

The Vietnam Development Bank may decide on loan terms for each project based on project appraisal results and under Clause 1 of this Article.

Special projects that need loans with a term exceeding the maximum loan term specified in Clause 1 of this Article may be appraised and proposed by the Vietnam Development Bank to the Prime Minister for consideration and decision.

(Clause 2 and 3, Article 8 of Decree 32/2017/ND-CP)

5. State investment loan interest rate in Vietnam

Specifically, in Article 9 of Decree 32/2017/ND-CP, the state investment loan interest rate is stipulated as follows:

- The state investment loan interest rate is equal to the weighted average of bid-winning interest rates of Vietnam Development Bank’s bonds with 5-year government guarantee within 1 year before the date of announcement of such interest rate under this Decree plus (+) a percentage of operation management expenses and a risk provision of the Vietnam Development Bank.

The Ministry of Finance shall submit to the Prime Minister for decision a management expense percentage to be kept unchanged for 3 years, which must enable the Vietnam Development Bank to have a sufficient operation funding source and set aside a risk provision under regulations.

When there appears a big change, the Vietnam Development Bank shall report an appropriate operation management expense percentage to the Ministry of Finance for submission to the Prime Minister for consideration and decision.

- On the last day of every quarter, based on the principle of interest rate determination prescribed in Clause 1 of Article 9 of Decree 32/2017/ND-CP, the Vietnam Development Bank shall determine and announce the state investment loan interest rate.

- The state investment loan interest rate for a project referred to in Clause 2 of Article 9 of Decree 32/2017/ND-CP shall be applied to all outstanding loans of such project from the time of adjustment.

- The overdue debt interest rate for a project shall be considered and decided by the Vietnam Development Bank but must not exceed 150% of the undue loan interest rate.

Thanh Rin

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