Bank loans

State Bank of Vietnam loans granted to non-bank credit institutions

Non-banking credit institutions (“NBCI“) are able to pledge their valuable papers to obtain loans guaranteed by the State Bank of Vietnam (“SBVN Secured Loans”) without the Prime Minister’s approval. This change took place in October 2011 and the arrangement has remained more or less unchanged since then. It will be useful to review this simple but very important framework.

Eligible borrowers

NBCIs are governed by the Credit Institutions Act. They carry out several banking activities (receiving deposits and granting loans). But they cannot take deposits from individuals, nor provide payment services through client accounts. NBCIs include finance companies, leasing companies and other NBCIs. They can operate either as a joint-stock company or as a limited liability company.

Conditions for receiving an SBVN secured loan

Generally, an NBCI can obtain an SBVN secured loan if it:

· is an eligible borrower and is not under the special supervision of SBVN;

· possesses valuable papers which he will use to meet the standards described in the “Qualifications and valuable papers” section below;

· has a borrowing purpose consistent with SBVN’s monetary policy objectives;

· has no outstanding debts; and

· agrees to use the SBVN Guaranteed Loan only for the purposes described in its loan application and to repay the loan on time.

Diplomas and valuable papers

To be pledged to the SBVN, valuable papers must:

· be legally negotiable;

· be in the legal title of the borrower;

· have a remaining term at least equal to the term of the SBVN Secured Loan; and

· not have been issued by the borrower.

Pledged papers can be denominated in Vietnamese dong or any other currency. The face value of securities is their fair value. From time to time, the SBVN may and does prescribe the priority ranking of valuable papers as collateral. The rate of exchange for the face value of papers of value is as currently stipulated.

SBVN Secured Loan Interest Rates

Interest on loans guaranteed by SBVN is equal to the refinancing interest rate charged by SBVN at the time the loan is drawn. The current refinancing rate is 4%. If the borrower does not repay on time, the loan is subject to a late payment interest rate of 150% of the agreed rate.

term of the loan

The term of an SBVN secured loan is less than 12 months and cannot exceed the remaining term of the pledged value papers. SBVN can extend the SBVN Guaranteed Loan upon request and depending on the purpose. SBVN’s overall monetary policy management at the time will also be a factor.

This article was updated in July 2022, and it also appeared on Mondaq in August 2022.