What are the regulations on overdraft and overnight lending procedures in the interbank electronic payment system in Vietnam? - Kim Anh (Long An)
Article table of contents
Overdraft and overnight lending procedures in the interbank electronic payment system in Vietnam (Source: Internet)
1. What is overdraft and overnight lending in the interbank electronic payment?
According to Clauses 1 and 2, Article 3 of Circular 29/2016/TT-NHNN stipulating overdraft, overnight lending in inter-bank electronic payment as follows:
- Overdraft in the interbank electronic payment refers to an arrangement where a credit institution is allowed to overdraw money greater than the available balance of a VND checking account opened at a transaction center of the State Bank (hereinafter referred to as VND checking account).
- Overnight lending in the interbank electronic payment refers to an arrangement in which the State Bank offers a credit institution a loan secured by financial instruments pledged as collateral within a specified time period starting at the end of the previous day and ending on the consecutive business day.
2. Overdraft and overnight lending procedures in the interbank electronic payment system in Vietnam
According to Article 8 of Circular 29/2016/TT-NHNN, overdraft and overnight lending procedures in the interbank electronic payment system in Vietnam shall include the following steps:
- Credit institutions deposit their financial instruments pledged as collateral for overdrafts and overnight loans;
- The State Bank of Vietnam notifies overdraft limits to credit institutions;
- Credit institutions receive overdrafts and overnight loans;
- Credit institutions repay outstanding loan balance;
- The State Bank of Vietnam recovers outstanding loan balance;
- The State Bank of Vietnam deals with credit institutions’ overdue loan balances and other related issues that may arise.
3. Regulations on implementation of overdraft and overnight lending operations in Vietnam
Regulations on implementation of overdraft and overnight lending operations according to Article 9 of Circular 29/2016/TT-NHNN are as follows:
- Implementation of overdraft operations
+ At 8 am every business day, the State Bank (Transaction Center) shall determine and notify the overdraft limit on interbank electronic payments applied to specific credit institutions.
Where there is any (increasing or decreasing) adjustment to overdraft limits within a business day due to any change to value of financial instruments used in overdraft and overnight lending activities or overdue overnight balances, the State Bank (Transaction center) shall determine and notify such adjustment to credit institutions.
Credit institutions shall be entitled to a reduction in financial instruments pledged as collateral for overdrafts and overnight loans only if total value of financial instruments which have already been provided meets the adjusted minimum overdraft limit which is equal to overdrawn funds;
+ Once a VND checking account of a credit institution does not have enough money to implement a payment order in the interbank electronic payment system, a maximum amount equal to the overdraft limit approved by the State Bank (Transaction center) shall be automatically overdrawn to pay for that order.
Once funds are deposited into a VND checking account of a credit institution, the payment system shall automatically repay amounts overdrawn within a business day by that credit institution.
- Implementation of overnight lending operations
+ By the end of a business day, if a credit institution has an outstanding overdrawn amount, the State Bank (Transaction center) shall automatically transfer such amount to an overnight lending account, and notify that credit institution of its outstanding overnight balance.
The credit institution shall be liable for overnight loan interest as defined in Clause 1 Article 7 of Circular 29/2016/TT-NHNN;
+ The business day immediately subsequent to the date on which the amount of interest on overnight loan arises, the credit institution shall pay the outstanding overnight principal balance and interest to the State Bank. The credit institution shall not be entitled to use overdraft as payment for the outstanding overnight principal balance.
By the end of the business day immediately subsequent to the date on which an overnight loan arises, unless the credit institution pays off the outstanding overnight principal:
The State Bank (Transaction center) shall carry forward that outstanding overnight principal to the overdue overnight principal balance and impose the interest rate on it in accordance with Clause 2 Article 7 of Circular 29/2016/TT-NHNN, and finally send a notification of that overdue overnight principal to the credit institution.
Quoc Dat
