Summary of lending methods of credit institutions in Vietnam

Summary of lending methods of credit institutions in Vietnam (Internet image)

Regarding this issue, LawNet would like to answer as follows:

1. Summary of lending methods of credit institutions in Vietnam

According to Article 27 of Circular 39/2016/TT-NHNN, the credit institution shall agree with its customer on application of the following lending methods:

- One-shot loan: The credit institution and its customer implement lending procedures and conclude a loan agreement in each time when a loan is needed.

- Syndicated loan: At least two credit institutions are together offering a loan to a customer for the purpose of implementing one fund borrowing plan or project.

- Loan for crop season interval: The credit institution extends a loan to a customer in order to cultivate or raise seasonal plants or livestock used in the next production cycle within a given year, or plants of which roots are retained and industrial crops which are annually harvested.

Accordingly, the credit institution and its customer shall agree that the outstanding amount of debt existing in the previous production cycle can be used for the following production cycle, but shall not be allowed to exceed the time length of 02 consecutive production cycles.

- Line of credit loan: The credit institution determines and agrees with its customer on the maximum outstanding amount of debt maintained during a specified time period. Within a credit line, the credit institution will extend a one-shot loan.

At least once a year, the credit institution will consider redefining the maximum outstanding amount of debt and duration of maintenance thereof.

- Provisional line of credit loan: The credit institution undertakes that fund is available to be lent to the customer and amount of that fund is restricted to the agreed amount of provisional credit.

The credit institution and its customer shall agree on the effective period of provisional line of credit which is not allowed to exceed 01 (one) year.

- Current account overdraft facility: The credit institution approves an overdraft limit within which the customer is allowed to spend more money than the amount available in the current account in order to render payment services on that current account. The overdraft limit is maintained within the maximum period of 01 (one) year.

- Revolving loan: The credit institution and its customer agree to extend a loan to meet the demand for fund used in the business cycle which is less than 01 (one) month and the customer is allowed to use the outstanding amount of principal incurred in the previous business cycle for the following one provided that the loan term remains fewer than 03 (three) months.

- Rollover loan: The credit institution and its customer agree on a short-term loan under the following conditions:

= On the payment due date, the customer is entitled to repay debt or extend the period of repayment of part or whole of the outstanding amount of loan principal for another specified time period;

= Total loan term is not allowed to exceed 12 months from the initial disbursement date and one business cycle;

= On the date when a loan application is considered, the customer does not incur any bad debt owed to credit institutions;

= In the process of a rollover loan, the customer owing any bad debt to credit institutions shall not be given any extension of the agreed period of repayment.

- Other lending methods not mentioned above shall be combined with those referred to in Clause 1, 2, 3, 4, 5, 6, 7 and 8 of Article 27 of Circular 39/2016/TT-NHNN as appropriate to business conditions of the credit institution and loan features.

2. Loan term of credit institutions in Vietnam

The loan term of a credit institution in Vietnam according to Article 28 of Circular 39/2016/TT-NHNN is as follows:

- The credit institution and its customer shall refer to the business cycle, duration of fund recovery and solvency of the customer, source of loan fund and the remaining duration of operation of the credit institution in order to agree on the loan term.

- The term of a loan offered to a customer that is a legal person established and operated within the territory of Vietnam, or a legal person established abroad and legally operated within the territory of Vietnam shall not exceed the remaining duration of legal operation of that customer, and to a customer that is a foreign citizen residing within the territory of Vietnam, shall not exceed the residual duration of legal residence in Vietnam.

>> CLICK HERE TO READ THIS ARTICLE IN VIETNAMESE