New foreign currency lending policy to be officially applied since 2019

03-Jan-2019 Intellasia | VnEconomy | 6:00 AM Print This Post

On 28th December 2018, the Governor of the State Bank of Vietnam (SBV) signed the approval for issuance of Circular No. 42/2018/TT-NHNN amending and supplementing specific articles of Circular No. 24/2015/TT-NHNN stipulating lending in foreign currencies by credit institutions to resident borrowers.

According to the State Bank of Vietnam (SBV), the issuance of new regulation is to specify the government’s policy on reducing dollarisation in the economy, step by step implementing the roadmap to gradually shift the lend-borrow in foreign currency relationship to buy-sell foreign currency relationship.

Circular 42 allows credit institutions to provide short-term loans to make overseas payments for importing goods and services to carry out production and business plans to serve domestic needs when borrowers have enough foreign currency sources from production and business revenues for loan repayment. This provision is effective until the end of 31st March 2019.

The Circular also allows short-term loans for overseas payments of imported goods and services to carry out production and business plan for exporting goods through Vietnam border when borrowers have enough foreign currency revenues for loans repayment; and medium-term and long-term loans for overseas payment of imported goods and services when borrowers have sufficient foreign currency revenues to repay loans, this provision is effective until the end of September 2019.

The above amendments show that SBV will restrict and gradually stop medium and long-term foreign currency loans in the coming year.

In addition, the new circular mentions short-term loans to meet domestic capital needs in order to carry out production and business plan for exporting goods through Vietnam border when borrowers have enough foreign currency revenues to repay loans.

Besides the above provisions, when loans are disbursed, borrowers must sell such amount of foreign currency to the lending credit institutions or branches of foreign banks in spot foreign exchange transactions, except for cases where loans are used to make payment in foreign currencies as stipulated by the laws.

Regarding the transitional period, for credit limits provided under loan contracts or loan agreements executed before the effective date of the Circular, single loan of these limits disbursed after the effective date of the Circular shall apply the provisions of this Circular.

In addition to the above cases, for single credit contracts of agreements executed before this Circular takes effect, credit institutions, branches of foreign banks and borrowers continue to follow the agreed terms and conditions in accordance with the provisions of law at the time of signing. In case there is any agreement to amend and supplement to such credit contracts or loan agreements, the amended and supplemented contents must be consistent with the provisions of this Circular.

This Circular takes effect from 1st January 2019.

 


Category: Finance, Vietnam

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