What is rediscount? Rediscount method between credit institutions in Vietnam

What is rediscount? Rediscount method between credit institutions in Vietnam (Source: Internet)

1. What is rediscount?

According to Clause 20, Article 4 of the Law on Credit Institutions 2010, rediscount means the discount of negotiable instruments and other valuable papers which have been discounted prior to their due date.

2. Duration of rediscount between credit institutions in Vietnam

The time limit for rediscounting between credit institutions according to Article 7 of Circular 18/2021/TT-NHNN is as follows:

- Duration of rediscount of negotiable instruments refers to the period starting from the date on which the rediscounting party rediscounts negotiable instruments to the date on which the beneficiaries must fulfill the repurchase guarantee or the date on which the payment specified on the negotiable instrument is matured and includes both holiday and non-working day.

- Discounting party and beneficiary shall agree on the duration of rediscount of negotiable instruments which must not exceed 12 months and not extend past the date on which the beneficiary must fulfill the obligation to sell the negotiable instruments to their customers (for cases where the beneficiary discount negotiable instruments from customers using temporary purchase)

Or the date on which the payment specified on the negotiable instruments is matured (for cases where the beneficiary discount negotiable instruments from customers using purchase with rights of recourse).

3. Rediscount method between credit institutions in Vietnam

According to Article 5 of Circular 18/2021/TT-NHNN, credit institutions and FBBs shall discuss and choose any of the following rediscounting methods:

- Temporary purchase of negotiable instruments refers to an instance where the rediscounting party purchases and receives negotiable instruments that are not mature from the beneficiary while being guaranteed by the beneficiary to repurchase the same negotiable instruments after a definite amount of time set forth under the rediscounting agreement.

- Purchase with rights of recourse of negotiable instruments refers to an instance where the rediscounting party purchase and receives negotiable instruments that are not mature from the beneficiary;

if the person or persons liable for paying for the negotiable instruments fail to make adequate payment, the beneficiary is then responsible for incurring the remaining payment for the rediscounting party on behalf of said person or persons.

4. Rediscount agreement between credit institutions in Vietnam

According to Article 9 of Circular 18/2021/TT-NHNN stipulating the rediscount agreement between credit institutions as follows:

(1) Negotiable instrument rediscount agreement between credit institutions and FBBs must be presented in format deemed suitable with regulations of the law and must contain the following details:

- Information on the rediscounting party and the beneficiary;

- Information on discounted negotiable instrument;

- Method of rediscount;

- Rediscount currency;

- Negotiable instrument rediscount price, payment date, payment method;

- Duration of rediscount;

- Rediscount interest rate;

- Rights and obligations of the parties;

- Penalties.

(2) When rediscounting negotiable instruments in form of temporary purchase, in addition to details under item (1), negotiable instrument rediscount agreement must include guarantee to repurchase negotiable instruments and repurchase price of negotiable instruments.

(3) When rediscounting negotiable instruments in form of purchase with rights of recourse, in addition to details under item (1):

Negotiable instrument rediscount agreement must include responsibility of the beneficiary to incur the remaining amount for the rediscounting party if the person or persons liable to pay for the negotiable instruments fail to do so adequately.

4. In addition to details under item (1), (2), (3), credit institutions and FBBs may agree to include other details in a manner conforming to Circular 18/2021/TT-NHNN and other law provisions.

Quoc Dat

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